Feb 2018, foreign media reported that Apple Company is negotiating with main cobalt manufacturers of the world, to make sure supply of raw materials of LIB.
Feb 2018, foreign media reported that BMW is about to sign a 10-year lithium and cobalt raw material supply contract for production reserves of new energy vehicles in the future.
Jan 2018, the UK ‘Financial Times’ reported that Chile SQM may co-construct lithium ore fabricating with Tesla to produce high quality lithium needed by Tesla batteries.
ASIACHEM <China Lithium and Cobalt Resources Annual Report 2018> shows that, since Jul 2017, global and China EV / power battery enterprises lithium resource layout is as table shown below.
Why so many EV / power battery enterprises distribute lithium / cobalt resources?
On one hand, to sure supply of lithium / cobalt resources. Public data shows that, in 2017, China NEV production was 794k, YOY increase 53.8%. Up to now, China NEV total parc reached 1.8M and occupies more than 50% of the world. Driven by development of EV, global lithium salts output was 235.4kt (Li2CO3 equivalent) in 2017, YOY increase 21.5%; among, output of China was 123.4kt, YOY increase 43.5%.
Apr 2017, MIIT etc. released <Vehicle Industry Mid and Long Term Development Plan>, which pointed out that to 2020, China NEV production and sales would reach 2M, to 2025, to occupy more than 20% of vehicle production and sales, which is around 7M.
If all the NEV in China use NCM523 battery in 2025 and average NEV battery capacity is 60kWh, ASIACHEM calculates that, only power batteries in China need 356.3kt Li2CO3 or 404.6kt LiOH in 2025.
On the other hand, to sure prices of lithium / cobalt resources controllable. In the past few years, as lithium and cobalt resources supply and demand is imbalanced of short duration and prices follow up and go up. Price of China battery grade Li2CO3 increased from about CNY 40k/t at the beginning of 2015 to about 160k/t at the end of 2017, which increases 300%; while cobalt concentrate increased from about USD 11/pound (CIF) at the beginning of 2015 to USD 20.5/pound (CIF) at the beginning of 2018, increases 87%.
Jun 2016, MIIT <Inform on Adjusting NEV Promotion and Application Financial Subsidy Policy> cleared that subsidy standard of 2019-2020 would decrease 20% base on current standard.
Mar 2017, NDRC <Promote Vehicle Power Battery Industry Development Action Plan> pointed out that new power LIB monomer cost would reduce to CNY 1/Wh by 2020.
Influenced by this, public information shows that, NEV enterprises general demand power batteries to reduce 20-30% price. Power batteries face huge price reduce pressure.
ASIACHEM <China LIB Annual Report 2018> shows that, in 2017, China NEV used power battery consumption was about 34.5GWh and capacity was 195.3GWh/a; in 2018, China power battery capacity will reach 297GWh/a. ASIACHEM believes that, through strategic layout of lithium / cobalt resources, NEV / power battery enterprises on one hand can ensure supply of lithium / cobalt resources to meet power battery production needed, and master more initiatives in fierce market competition in the future; on the other hand can ensure prices of lithium / cobalt resources controllable, so that enterprises economic benefits and profits can be increased.
However, it is notable that, under market expectations of current stage, it is a tough task to control lithium / cobalt resources.
Sep 2017, Volkswagen issued a tender, seek for a minimum of five years of supply of cobalt at a fixed price. Although Volkswagen expressly declared that it would give subsidies to suppliers, quoted price in the contract was far lower than current market price. Glencore, one of negotiation partners of the tender of Volkswagen, has declared it would never long-term sell cobalt price at current market price, and almost all the other power battery raw material manufacturers stated that they would not accept the quoted price of Volkswagen.
This also suggests that, it is almost impossible to lock supply amount and price of lithium / cobalt resources by directly signing long term purchase agreement. ASIACHEM believes that, on one hand, those global and China EV / power battery enterprises can strengthen relations and discourse powers by way of becoming the shareholders of resource owned enterprises and which is benefit for signing sales and purchase contracts which are more reasonable; on the other hand, it is also a long term and reasonable scheme for them to set up investment funds to directly get involved in resources prospect and development.
