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Joe Lowry talks global lithium shortage — Transcript

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0:00hello everyone and welcome to etioto my
0:03name is shruti mishra and today i'm
0:05bringing you a fireside chat on lithium
0:08for almost two years microchip shortages
0:11battered the automotive industry and now
0:14the car makers globally are on the verge
0:16of facing another bottleneck which is
0:18lithium a prime element in the electric
0:21vehicle batteries
0:24lyrium demand is accelerating and the
0:26prices of raw material has gone up to an
0:29insane levels
0:31the price of medium skyrocketed by over
0:34400 percent
0:36in the past one year
0:38as the battery demand continues to climb
0:41our guest today is one of the world's
0:44leading lithium market experts
0:47popularly known as mr lithium in mining
0:50circles worldwide he has a vast three
0:53decades of experience in this business
0:56he has been a consultant to mining
0:58companies and an investor and also owns
1:00shares of companies including tesla and
1:03lithium americas
1:05here to share his take on the massive
1:08lithium supply problem
1:10please welcome mr joy lori
1:12managing director and founder of
1:14advisory firm global lithium llc
1:18hello mr laurie a very warm welcome to
1:20the show
1:21good afternoon i guess where you are or
1:23early evening thanks for having me let's
1:26kick off this interaction with
1:28supply responses
1:30is it enough or
1:32is the freakout moment for ev players
1:35coming soon
1:37or have we reached a critical point in
1:39time where everything is just gonna fall
1:42fall apart oh i think we've already
1:44reached the crisis moment i think that's
1:47pretty clear just by what you've seen
1:49happen with the spot prices
1:52now a lot of the uh
1:54like a tesla
1:56has was covered for a
1:58a year or two with different contracts
2:01they had
2:02but even tesla and if anyone listened to
2:04the tesla earnings call last week they
2:06heard elon musk talking about
2:09uh the price of lithium and the problem
2:11it is but tesla's not in that bad a
2:13position the other automakers
2:16are going to face extreme hardship in
2:18terms of actually producing
2:21the models they've promised
2:23joy
2:24i just want to understand that
2:26what is the underlying problem that led
2:29to the situation well the underlying
2:31problem
2:32is that
2:34if you look at
2:35people like me have been saying
2:38for a number of years going back
2:40even to the last
2:43you know supply crunch
2:45that
2:46the automakers needed to make sure
2:49that new lithium projects were invested
2:51in and you had
2:53some of the ceos of these companies
2:56as recently as two years ago saying
2:58lithium is the battery guys problem
3:01well
3:03now lithium's everybody's problem
3:06absolutely and when we are talking about
3:09the problem and uh like deficit
3:13so
3:14what is the approximate figure of
3:16shortfall that the world is facing right
3:18now if we have to uh like uh estimate
3:23for this decade like by by 2030
3:26by what amount are we falling short of
3:28or do we have that much of resources
3:31even to the to get cater they demand
3:33existing demand
3:35globally
3:36there are plenty of lithium resources in
3:40the world
3:42there was a dearth of investment at a
3:45critical period that's why we're short
3:48now
3:49and it's why we're going to be short for
3:50the rest of the decade if you look at 20
3:5430 demand projections and what i tend to
3:56look at is the gigawatt hours
3:59that will actually be online and
4:01different people have different numbers
4:03mckinsey came out with a number last
4:05week
4:06that was somewhere between 3.5 and 4
4:10terawatt hours well the lithium industry
4:12can't respond to that not in that time
4:14frame
4:16i'm not saying there will always be a
4:19shortage of lithium
4:21but because you can build a gigafactory
4:24in two years plus or minus you can build
4:27cathode capacity and less than that but
4:30it can take up to 10 years to bring a
4:31lithium project online
4:33we're already short now
4:35this year
4:37demand will outstrip new supply by
4:39probably another 50 000 tons
4:42and from my perspective
4:44going through the rest of this decade
4:47the demand line doesn't even matter
4:48because there's more more demand
4:52than we can fulfill so it's really
4:55about the supply line
4:57and who has access to it
5:00which is really going to be telling
5:03around the globe when some of the
5:06particularly the european automakers
5:08talk about all the models are going to
5:10bring out
5:12it won't happen look at even even tesla
5:14the waiting list now for some of the
5:16models is over a year
5:19exactly
5:20so troy you have been tweeting about
5:23this problem
5:24for a very long time
5:26and if we talk about the
5:28industry uh
5:30as a whole
5:31didn't we see this coming or why are we
5:35facing this issue in 2022
5:38that's a great question that is a great
5:40question and it does have an answer if
5:43you go back to the last shortage which
5:46really started at q4 of 2015
5:50but you also have to look at what ev
5:52penetration was at the time or the the
5:54eb demand it was about one percent
5:57and it was mostly in china
5:59what happened then is pricing shot up
6:02from under 5 000 to almost 30 000 there
6:05was a lot of talk about you know the
6:07lithium shortage but it's a commodity
6:09and there'll be a supply response
6:12lithium is not a commodity it's a
6:14specialty chemical
6:16but in that particular case
6:19he had four or five mines in australia
6:22that were coming on
6:23anyway they did not come on as a
6:25response to the shortage they were
6:27already planned before there was a
6:28shortage
6:30and then you had
6:32an oversupply of spongamine which is the
6:35precursor in hard rock mining to making
6:37lithium chemicals
6:39so then
6:41the price crashed
6:43battery quality
6:45pricing didn't crash as much as the
6:47commodity side of it did but you had by
6:502019 very low prices
6:53so this was this was what the automaker
6:55said see this is just a commodity when
6:57demand goes up there's a supply response
7:00and that's the way the world will work
7:02the problem is
7:04there was almost no ev demand then
7:07and you had
7:09four or five mines come on in rapid
7:10succession
7:11now
7:13we finally have real eb demands
7:17there aren't four or five new mines
7:19coming on a couple of the mines that
7:20were forced to shut down are restarting
7:24but now you have i guess a perfect storm
7:29you had
7:30auto makers never really paying
7:32attention to lithium and then what they
7:34saw in 16 and 8 to 18
7:37was like oh this is just like any other
7:40commodity
7:41they'll be if there's a
7:43shortage it'll be corrected within a
7:45year or two
7:46unfortunately now
7:48even with
7:50less than 10 percent
7:52globally much less than 10 globally ev
7:55penetration
7:56there's a panic
7:59pricing has shot up from for spot
8:01pricing in china from
8:03below 5000 to over 80 000 in two years
8:07[Music]
8:09and
8:10this year you don't have much coming on
8:13uh you know you have some
8:14mine expansion some restarts and if you
8:17look at south america
8:19sqm will produce another 30 or 40 000
8:22tons
8:23ammo mile maybe five or ten
8:25argentina nothing because lithium
8:27america's doesn't start up until late in
8:29the year so that won't really get into
8:31the supply chain
8:33and demand just
8:34all the surprises we see tend to be of
8:37the positive surprises tend to be on the
8:39demand side and all the negative
8:41surprises tend to be on the supply side
8:45absolutely uh joy mentioned about uh the
8:49dirt of investments but if we go by the
8:53industry data or industry information
8:56there are many geographies that for
8:58example saudi arabia russia that is
9:01coming into picture with whether with
9:04their minds and projects
9:06don't you think that this
9:09is gonna solve resolve anything
9:12very soon or in the near future
9:15not not in this decade look at russia
9:18they don't even have there's no
9:19permitted mind project in russia right
9:21now the the guy one of the people who
9:24runs
9:25one of the conversion operations in
9:27russia is a friend of mine he's been on
9:29my podcast and i talked to him last week
9:32they're in a tough spot because of the
9:34sanctions getting raw materials not that
9:37easy fortunately for him
9:39because the relationship with china
9:41remains then he still has a market for
9:43his product but he he was talking to me
9:46specifically about
9:47maybe this
9:49crisis would help speed up permitting of
9:51a spaghetti project
9:52but that will that won't be a massive
9:55project that might be
9:57another 25 000 tons a year when and if
10:00it happens saudi arabia where's their
10:03resource
10:05now they have the money they could have
10:07made a difference
10:09they
10:10i i was talking to people in that part
10:12of the world in 2014 2015 about
10:16investing in lithium and none of it ever
10:18happened
10:20so
10:21um i wouldn't look i wouldn't look at
10:24uh the old oil kingdoms
10:27uh just yet as i think they'll they will
10:29make investments but even it's not about
10:32money now it's about execution
10:34absolutely
10:36because now now that people have
10:38internalized like elon musk is talking
10:40about we may have to get into the
10:41business
10:42um
10:44you'll see you'll see money flow you saw
10:46zijan mining by neo lithium in argentina
10:50i was actually the one who connected
10:52gang fan and lithium americans in
10:54five years ago for their investment
10:57uh
10:58you know people have a people really
11:01this is a really misunderstood industry
11:04because people think china dominates it
11:06china is actually the most dependent
11:08country
11:10that has a major interest in lithium
11:12because their their feed stock comes
11:14from western australia and south america
11:16so geopolitically
11:18this isn't like rare earths where china
11:21does have
11:22a
11:24solid resource position a dominance
11:27in lithium
11:29china has the most conversion capacity
11:32but they're dependent for most of their
11:34feedstock
11:36right
11:37and another industry data
11:39shows that in 2021
11:41almost
11:4290 percent of the lydia mining took
11:45place in in just
11:47just the three economies which are
11:49australia chile and china
11:52so do you forget you're forgetting
11:54argentina which oh yeah
11:56yeah yeah that's something i'm really
11:58sorry for that
12:00so
12:01uh
12:02do you think that
12:03these well established country that has
12:06uh the leading reserve or lithium
12:08producing countries are aware of the
12:10importance of lithium in this global
12:12situation and what
12:15and what are the government of these
12:17countries are doing are they doing
12:19enough to support the industry and move
12:21it forward as it should be
12:24well first
12:25first let's look at western western
12:27australia you can really look at a
12:29province in australia as being the key
12:32western australia
12:34right now has all the lithium production
12:36in australia and they've done a great
12:37job
12:38of
12:40up until now keeping the lithium
12:42industry in relative balance but there
12:44comes a point
12:46where
12:47one of the producers uh was on my
12:49podcast recently or a former producer
12:52and he said you know we're going to get
12:53to peak lithium in western australia and
12:55that's probably going to be at about
12:571.5 million tons of lithium carbonate
12:59equivalents so you're going to have to
13:01you're going to have to develop africa
13:03and that's starting to happen now
13:05but it's going to take time and
13:08mo investors aren't that anxious from
13:11both an investment in an esg perspective
13:14and going to the congo or going to mali
13:16so
13:18africa can be a little bit problematic
13:21the south americans
13:23are very cognizant of their position in
13:26the world but now you've got
13:28a nominal communist running chile who's
13:30making noise about
13:32you know people are afraid of
13:34nationalization now and you know mexico
13:37would that's not a lithium producer
13:38right now although they do have lithium
13:40in the country
13:42are talking national
13:44nationalizing lithium assets that makes
13:48global investors nervous about argentina
13:50because
13:52people tend to
13:54look at argentina's history with the imf
13:57and with other problems i'm a big
13:59supporter of argentina i love argentine
14:01i like the country and i was involved
14:03with the first lithium project there
14:05i've taken
14:06dozens
14:07of lithium buyers from asia
14:09to
14:10the lithium provinces of
14:12argentina
14:14but you know we also have some
14:18government issues there
14:20but they tend to get worked out so i i
14:22think the countries are cognizant and i
14:24think
14:25what you're seeing now is
14:27a move away from kind of a colonial
14:30treatment
14:31of producers they want a bigger piece of
14:33the pie
14:35and
14:35i mean chile totally redid their
14:38uh royalty regime a few years ago
14:42and they have
14:44the prices when the price gets over 10
14:47000
14:48the royalty kicks up to 40 percent and
14:50that's a substantial royalty on that
14:52increment
14:53uh it starts at 6.8 and it stair steps
14:56up as price goes up but once price gets
14:58to 10 000 for lithium carbonate there's
15:00a 40 royalty on it so
15:03the point i'm making though is that even
15:05if
15:06a communist guy is comes into power
15:10lithium is kind of the golden goose at
15:12prices like it is now so
15:14if you want to run a government you're
15:16you're not going to be anxious to do
15:18something foolish and shut down
15:20uh existing operations
15:23to make a point
15:25and i think chile is one country where
15:28uh it is facing some internal issues
15:30with albert marley and uh and and the
15:33other uh
15:34uh like my mining sql sql
15:38exactly so they are uh facing uh some
15:41internal issues there some mining issues
15:43related to labor laws and many many
15:45other things
15:46so there there's a lot of
15:49there's a lot of angst i mean you've
15:51seen a transition now where the
15:52indigenous people are better represented
15:56there
15:56the atacama desert is the driest place
15:58on earth there's a large concern about
16:01water management
16:03the lithium companies haven't always
16:05followed the rules and there's a bigger
16:07push especially with esg investing now
16:10and these companies are are under a lot
16:12of scrutiny from investors and that's
16:14that's kind of the yin and yang of
16:17the energy transition is you have a lot
16:19of people that don't like mining
16:24they don't like disturbing the earth but
16:26they want electric cars
16:29and you know without i mean or they
16:31tweet about it on an iphone and all the
16:33iphone is is a collection of mine
16:35materials
16:36absolutely
16:38so you have to have mining needs to be
16:40responsible mining
16:42but that slows things down too look at
16:45the permitting battles in europe or the
16:48united states on new lithium projects
16:52uh troy
16:53talking about the investors sentiments
16:56last time when the prices of uh leading
17:00spy
17:01so
17:02the fund funding projects wasn't easy at
17:05all
17:06so that's right
17:08do you think that it is changing right
17:10now or in investors perspective has
17:13changed now they're taking things with
17:16with a much more you know
17:18you're asking the right question that's
17:20a good that's a that's an excellent
17:21question and and i i'll answer it
17:25in 2016 to 2017 i did
17:28i did calls compensated calls with
17:31dozens of hedge funds
17:34when they looked at lithium though
17:36the lithium industry didn't become a
17:37billion dollar industry lithium
17:39chemicals until 2015.
17:43so when
17:44a big fund would look at this
17:46and then they'd look at how long it
17:48takes to bring an asset online
17:50and there's no lme pricing for lithium
17:54and they they were in a situation where
17:56they were seeing price had jumped up the
17:58price came down and when price came down
18:01they really
18:03lost a lot of confidence that
18:05lithium was investable for them
18:08so now i think you've gone to the era of
18:10strategic investors
18:13and what you'll see now is
18:16big battery companies
18:19big automakers
18:22if they don't invest themselves they
18:24will either do
18:26some mechanism
18:27whether it's off take
18:29or loans
18:31or direct investment i i think you'll
18:34see more and more of that and you've
18:35seen
18:37uh
18:38i've seen big oil
18:40much more interested in taking a look at
18:42lithium again i've had meetings with
18:43major oil companies and uh and some
18:46sovereign funds so i i think now people
18:50have seen tesla's real if you go back to
18:522016 and 2017
18:54there wasn't an ev company outside of
18:56china that had any credibility
18:59people in 16 and 17 were still like is
19:01elon musk going to actually
19:04do anything and now he's got
19:06just opened a gigafactory in
19:08germany just opened a factory in austin
19:11texas tesla is for real
19:13and
19:15all the
19:16other big oems
19:18are now talking about going electric by
19:20a certain date all electric whether it's
19:2220 30 or 20 35
19:25and that gives
19:26investors more confidence that this
19:29whole transition is really happening and
19:31you didn't have that in 16 and 17
19:33honestly
19:34that's right right now uh
19:36the
19:37lithium battery prices are at all time
19:40high
19:40like some 400 above 400 jump that we
19:44have seen right now so
19:46do you think that it will put a full
19:48stop on the great eevee push or
19:51do you think that it will only delay it
19:54but the pace will remain the same going
19:56forward
19:57i don't think the i think the rate of
20:00growth is going to slow down simply
20:01because of lack of lithium and i think
20:03almost in in a sense that's a
20:06in a perverse way that actually
20:10is going to play out so that
20:13the wealthy people
20:15get the evs because
20:18uh a tesla model s
20:21costs a lot more
20:23than one of the the smaller cars and
20:25automakers are going to go for where the
20:27profits are and the profit's going to be
20:29in a in a bigger car and when you have a
20:31lithium shortage
20:33what you're probably you're not going to
20:34be able to do is come up with a 40 000
20:38ev that somebody wants to buy i mean
20:40look at the look at the price increases
20:42tesla's just put out there
20:43and people thought you know the model 3
20:45was originally supposed to be like a
20:47people's car
20:48well
20:49something that cost 60 to 70 000
20:53is not a people's car especially even in
20:56the united states and now if you go to
20:57other countries where
20:59the
21:00average income is lower it's gonna it's
21:02gonna be tough so i think
21:04unfortunately a lithium shortage
21:07plays into the it it becomes then also
21:11a cultural and political problem
21:15because
21:17you know you'd you really like to see
21:20a little more equal footing for people
21:22that want to go electric rather than
21:25because of a lithium shortage the car
21:27companies are making higher end vehicles
21:29to make make more money i mean you also
21:32have to look at i mean from an auto
21:34perspective
21:35look at germany
21:37look at look at all the disruption
21:39there's going to be auto repair shops
21:43are not going to be
21:46good businesses
21:47with electric vehicles because they
21:49require almost no maintenance and i say
21:52germany because they have stronger
21:54stronger unions and you know there's
21:56there's a whole lot of
21:59different
22:00touch points this transition is going to
22:03have on the human side
22:05and and jobs is one of them
22:07and uh so we are hearing hearing a lot
22:10about
22:11the the impact of prices on the markets
22:14like germany
22:16and europe
22:17but
22:18what will be the situation if the prices
22:22uh inches up further for a country
22:25like india which is a price sensitive
22:28market and where the eva revolution has
22:31just begun
22:32so what sense are you getting for these
22:35markets like india
22:37well it's interesting
22:39that
22:40i mean i think the and you can correct
22:43me quickly but i was on a podcast with
22:45somebody from india who's in the
22:46business not too long ago
22:49and
22:50i think your market is different i think
22:53the market that there's going to be more
22:56three wheelers
22:57and and scooter type transportation
23:01and i think it's really
23:03up to india to start growing their their
23:06own ecosystem
23:08to make sure that people get electric
23:11transportation
23:12uh i lived in china for a long time you
23:15know we had we had scooters they were
23:17battery powered but they were lead acid
23:19or you know they weren't the kind of
23:22technology you wanted to have i i think
23:25also that
23:27because the lithium use if you're you're
23:30having
23:32battery swapping which i know is a is a
23:34thing in india and smaller lfp batteries
23:39and a willingness also to take lower
23:42quality batteries i mean it's a
23:43bifurcated it's a bifurcated market
23:46we are coming up with a policy on
23:48battery swapping yeah i mean i talked to
23:51i talked to a huge company
23:54that
23:55is not india based that was talking to
23:58me about
23:59that whole thing and wanting to invest
24:01in it so i think
24:02i think you'll find creative ways i
24:04think
24:05you know a
24:07crisis when you have the will you find
24:10ways around
24:11a crisis and i think uh
24:14because
24:16you can have so many vehicles
24:19on the road that are small
24:21and use a
24:24simpler technology uh to to be clear
24:27than than what you need in a high-end
24:29tesla i i think i think from any
24:32transportation
24:33perspective
24:35you know india just needs to do the
24:37right thing and they need to secure
24:38supply and that's something i've had a
24:40lot of some of the big indian companies
24:42called me four or five years ago and
24:44wanted to get into lithium and they
24:46didn't
24:47so they made this they made the same
24:49mistake everybody else did
24:51somebody is going to have to
24:53get access to a certain amount of
24:55lithium but because of the structure of
24:56your e-transportation you're not going
24:58to have the same problem you know the
25:00european union has or probably the
25:03united states has either and you'll be
25:04on the forefront of recycling as well
25:07and lastly uh jo jo just wanted to
25:10understand that
25:12do you feel that this going to be an
25:14ongoing deficit because of the lack of
25:17ability to quickly respond to the
25:19increasing demand
25:20you know yeah
25:22when you go out a decade you're taking
25:25in making predictions you're taking a
25:27big risk because things can change and
25:30will change over time but there's two
25:33two really important points your
25:34listeners need to understand
25:36the lithium shortage is actually
25:38understated
25:40and the reason i say that is because
25:42every time a new gigafactory comes
25:44online
25:45they have a ramp up like a lithium
25:47project does and they have a reject rate
25:50that can be 30
25:52for months
25:53so that's a lithium molecule that is
25:56then delayed to the market
25:59when you delay a lithium molecule to the
26:01market a recycler has to process it
26:05and there's an efficiency loss in that
26:07so
26:08lithium is going to be
26:11in a continual problem until you have
26:16much more investment in mining and a
26:19robust recycling industry and
26:22enough evs that have reached the end of
26:24life
26:25to provide feedstock right now all the
26:28recycling isn't the circular economy
26:32when it has to take gigafactory waste
26:35that's original lithium that never got
26:36into a battery in the first place so it
26:38has to make
26:39a round trip through recycling
26:42as
26:43battery factories
26:46come online across europe across north
26:48america
26:50that is something that most people don't
26:52put into their supply and demand models
26:55and it's going to be relatively obvious
26:57look at what redwood materials which is
26:59located in nevada not too far from the
27:02gigafactory
27:05that's
27:06in business because of the waste
27:09initially from
27:11making the batteries for tesla
27:13exactly
27:15and this brings us to the end of this
27:17exciting interaction
27:19thank you joe for sharing your ins this
27:22uh such insightful information
27:25thank you
27:26thank you
27:28[Music]

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