Raw material impact of the lithium ion battery surge

Simon Moores, Managing Director Benchmark Mineral Intelligence

BMO Capital Markets, Global Metals & Mining ConferenceHollywood, Florida, US28 February 2017

www.benchmarkminerals.com

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• Global investment seminars on lithium ion battery supply chain • 14 cities in 2017• ½ day, free to attend • http://benchmarkminerals.com/worldtour2017/

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-60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140%

Aluminium

Coal (Thermal)

Cobalt (metal)

Copper

Graphite (Spherical)

Iron ore

Lithium (Carbonate)

Lithium (Hydroxide)

Nickel

Bloomberg Commodity Index

Mineral & Metal Prices: Feb 2015 versus Feb 2017

Prices: 2015 v 2017

NCA NCM LCO LFP

Lithium Cobalt Nickel Aluminium Iron Phosphate

Mined Graphite Synthetic Graphite Silicon

• Anode on copper

• Separator

• Cathode on aluminium

Cylinder (18650, 2170)Pouch Prism

Battery Pack

EV Platform

Rolled / Cut

Lithium ion batteries: From mine to market

0

10

20

30

40

50

60

TeslaMotors (US)

LG Chem(US)

LG Chem(Nanjing)

LG Chem(Poland)

LG Chem(Korea)

BYD China(Shenzhen)

BostonPower(Liyan)

BostonPower(Liyan)

SamsungSDI (Xian)

SamsungSDI (Korea)

Panasonic(Dalian)

Lishen(Tianjin)

CATL(NingDe)

CALB(Luoyang)

2016 Capacity (GWh) Benchmark's 2020 Cell Production Capacity Forecast (GWh)

Lithium ion megafactory capacity expansion by end-2020 (GWh)

2017: 30GWh = ~30% of output

2020: 174GWh= ~70% output

The lithium ion megafactories are coming…

Lithium

o Up 2-3 x outside of China o Up 3-4 x within Chinao Lithium Carbonate & Lithium Hydroxide, both key battery raw materials

Lithium’s price spike is driving interest…

Price differences, function of supply chain

180-185k tpa LCE

Brine Hard rock (spodumene)

Chile68%

Argentina25%

China7%

Australia, 100%

Battery grade

76-83k tpa LCE

ChinaChile, Argentina, US, China

Lithium ion batteries now the driver…

Glass/Frits21%

Lithium ion batteries

22%

Grease15%

Air Con 8%

Other34%

Glass/Frits20%

Lithium ion batteries

42%

Grease10%

Air Con 8%

Other20%

Lithium’s End Markets

2006 2016Glass/Frits

16%

Lithium ion batteries

67%

Grease8%

Air Con 4%

Other5%

2020

• No huge oversupply of lithium

• 5 year growth trajectory: 12-15% a year

• Lithium Carbonate & Hydroxide Prices to remain high for the medium term

• No price crash

• Spodumene to fill the 2017-2018 supply deficit

• China has 30% excess capacity

• New brine resources 2020 and beyond

• M&A and JVs to continue • Albemarle, Tianqi, Ganfeng most aggressive

Lithium trends to watch…

Graphite

Anode grade graphite, dominated by China

1.5m tpa

Natural Spherical Graphite

Synthetic Graphite

China100%

China , 73%

Japan, 15%

Other, 12%

Battery grade

90-100k tpa

ChinaChina, Japan, Korea

All Graphite

Lithium ion batteries to challenge for top spot…

Refractories (Steel)

38%

Lithium ion batteries

0%Foundries21%

Lubricants10%

Recarburizer (Steel)

8%

Other 23%

Refractories (Steel)

27%

Lithium ion batteries

16%

Foundries17%

Lubricants10%

Recarburizer (Steel)

8%

Other 22%

Flake Graphite’s End Markets

2006 2016

Refractories (Steel)

29%

Lithium ion batteries

35%

Foundries17%

Lubricants9%

Recarburizer (Steel)

8%

Other 2%

2020

• 5 year growth trajectory: 13-16% a year

• Natural graphite anodes to increase market share over synthetic• Supply issue, improving quality, lower cost

• Synthetic will operate in a high quality niche

• CO2 footprint becoming a consideration

• Coated Spherical Graphite to become cheaper• From $12-16/kg today to sub $8/kg

• Silicon to not be a major substitution factor medium term• 3-6% additive to improve capacity

Graphite trends to watch…

Cobalt

o 2016: 100,000 tpa market o LME Cobalt metal Up >60% in 12 months o Battery grade precursor – Cobalt sulphate heptahydrate (premium)

After years of depression, cobalt’s price is spiking

DRC59%

Canada 9%

Australia 5%

Cuba6%

Russia 5%

Lithium ion dominance to grow…

Lithium ion batteries

20%

Superalloys 24%

Hard materials

12%

Ceramics/Pigment

10%

Other34%

Cobalt’s End Markets

2006 2016

Lithium ion batteries

51%

Superalloys 20%

Hard materials

8%

Ceramics/Pigment

8%

Other13%

Lithium ion batteries

62%

Superalloys 16%

Hard materials

6%

Ceramics/Pigment

6%

Other10%

2020

• 5 year growth trajectory: 8-10% a year

• Supply to return H2 ‘17 – Glencore (Katanga) amid rising prices

• Political resolution in DRC emerges

• Rising Prices: >60% increase in 12 months • ~$16/lb versus crisis price of ~$52/lb

• Battery demand the biggest prevailing factor

Cobalt trends to watch…

0

50000

100000

150000

200000

250000

2015 2016 2017 2018 2019 2020

Lithium (LCE) Graphite Anode Cobalt

65GWh

74GWh

What does this mean for raw material demand …

Benchmark’s conservative forecast

85GWh

110GWh

130GWh

170GWh

Benchmark’s Price Assessments…

Each month Benchmark Mineral Intelligence undertakes market price assessments for key minerals and chemicals used in the manufacturing of lithium ion batteries.

Our prices are collected and published through methodologies that are specific to: • Lithium• Graphite• Cobalt

Each price assessment gathers the prevailing volumes traded that month, rather than just a small volume, spot trade.

Benchmark is the world’s only company to be dedicated to the collection of lithium ion battery raw material data.

Subscribe to Benchmark’s Price Assessments TodayContact Andy Miller on amiller@benchmarkminerals.com

Lithium Graphite

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