For a long time, most of the world’s lithium was produced by an oligopoly of producers often referred to as the “Big 3.” Prior to being acquired by Albemarle (NYSE:ALB), Rockwood Lithium, part of Rockwood Holdings was on that list. The other members of the club were Chile’s Sociedad Quimica y Minera de Chile (NYSE:SQM) and FMC (NYSE:FMC), which operates in Argentina.
However, the list of the world’s top lithium producers has changed in recent years. Those companies still produce the majority of the world’s lithium, but China continues to take a huge chunk out as well. China was the fourth-largest lithium-producing country last year in terms of mined production, according to the US Geological Survey, following Australia, Chile and Argentina.
More importantly, however, Australia does not currently produce lithium chemicals, and China is producing more and more of them.
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Even though Australia narrowly beat out Chile last year in terms of mined production, its largest mine, the Greenbushes lithium project, is majority controlled by China’s Tianqi Group. Tianqi owns a 51-percent interest in Talison Lithium, which runs the mine, while Albemarle now owns a 49-percent stake in the company via its acquisition of Rockwood.
Certainly, securing a steady supply of lithium is becoming mroe and more important for end users. According to Bloomberg, Sichuan Tianqi Lithium Industries (SZSE:002466) and Jiangxi Ganfeng Lithium (SZSE:002460) have seen their stocks nearly double in the past year. At the same time, China based electric car and bus maker BYD is under pressure to “get hold of lithium resources,” to bring down battery costs.
Lithium expert Joe Lowry has written extensively about China’s rising share of the lithium market. The graphic below, put out in 2015 using results from 2014, outlines how the global lithium space has changed over the past decade or so:
Source: Global Lithium LLC
The market share for the “Big 3” lithium producers has dropped from about 85 percent to 53 percent, while China now has about 40 percent of the world’s market share. Lowry has also created a more detailed breakdown of the global lithium market share, with Tianqi, Ganfeng and other sources of Chinese production clearly being significant:
Source: Global Lithium LLC
In other words, lithium investors need to be keeping an eye on lithium producers China, as well as on the New York-listed chemical companies among the ranks of lithium producers. Here’s a look at some of the world’s largest lithium producers.
Albemarle
When Albemarle closed its acquisition of Rockwood Holdings and Rockwood Lithium in early 2015, it became the heavyweight in the lithium space. The company’s net sales for lithium were approximately $508.8 million for 2015, well above what was reported by SQM and FMC. Lowry calls Albemarle the lithium superpower.
The company owns lithium brine operations in the US and Chile, and, as mentioned above, it owns a 49-percent stake in the massive hard-rock Greenbushes mine Australia. Albemarle said this September that it has plans to up its battery-grade lithium production with the addition of a new plant using feed from Greenbushes. It is unclear just how much production would be added, and the company has not yet decided where the plant will be built.
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On February 1 2016, Albemarle was granted a long-awaited permit to increase its lithium brine extraction rate at its operations in Chile. The company also signed a memorandum of understanding (MOU) with the Chilean government to define a partnership for the increased lithium quota. However, SQM has stated that it will seek to challenge the granting of this permit.
The company also produces bromine and other performance chemicals, and has refining solutions and Chemetall surface treatment business segments as well. Lithium made up approximately 15 percent of Albemarle’s core business revenues in 2014.
SQM
Revenues from lithium and derivatives for 2015 came in at US$223 million for SQM, an increase of 7.8 percent compared to 2014. The company stated that its lithium business accounted for approximately 21 percent of its gross profit margin for the year.
The company faced some challenges in 2015. It spent plenty of time butting heads with Chile’s Corfo over its leases in the Salar de Atacama, where the company’s brine operations are located. Earlier in 2015, the company got some unwanted attention as part of a broader probe into into bribery and tax evasion in Chile, leading the company’s CEO to resign and to three directors representing Potash Corp of Saskatchewan (TSX:POT) leaving the company as well.
On March 28 2016, SQM announced a joint venture with Lithium Americas (TSX:WLC) to develop the Cauchari-Olaroz lithium project in Jujuy, Argentina, marking SQM’s first investment in lithium production outside of Chile.
Beyond its lithium business, SQM is also a significant potash producer and the world’s largest producer of iodine.
FMC
FMC, which operates its lithium business in the Salar del Hombre Muerto in Argentina, reported lithium segment revenues of $238 million for 2015, seven percent lower than in 2014. Full year earnings from FMC’s lithium business came in at $23 million, $4.2 million lower than in 2014.
The company reported that higher prices for lithium hydroxide and lithium carbonate, as well as cost savings projects, helped to offset inflation and currency impacts in Argentina for 2015.
FMC, like most others following the lithium sector, sees strong lithium demand with prices continuing to rise. However, though the company plans to increase its lithium hydroxide throughput by another 10 percent in 2015, Lowry noted in an overview of the company’s annual report that the company will still be producing less than they were a few years ago.
In an era where hydroxide is in a global period of undersupply and prices are triple last year in some markets –it would be wonderful if FMC could state they had record production,” he stated, “but unfortunately they do not and prefer to highlight incremental year over year increases.”
Sichuan Tianqi Lithium
Lithium producer Tianqi Lithium is a subsidiary of Chengdu Tianqi Group, headquartered in Chengdu, China. The company states that it has been focused on advancing its entire lithium processing chain in regards to securing a large share of the lithium battery market. It is the world’s largest hard-rock-based lithium producer.
Tianqi beat out Rockwood Holdings to take control of Talison Lithium, which owns the Greenbushes mine in Australia, in 2012. However, it subsequently sold a 49-percent interest in the company to Rockwood, which is now owned by Albemarle.
Jiangxi Ganfeng Lithium
Ganfeng Lithium is another important Chinese lithium producer that investors should be keeping an eye on. Headquartered in Xinyu, China, the company is China’s second-largest lithium producer.
Like Tianqi, Ganfeng is also buying up interests in lithium companies outside of China. It owns a 14.7-percent stake in junior lithium company International Lithium (TSXV:ILC), and signed an MOU for an offtake agreement with Australia’s Reed Industrial Minerals, owned by Neometals (ASX:NMT) and Mineral Resources (ASX:MIN), in July 2015.
Furthermore, Lowry has said that Chinese lithium producers are becoming much more significant as suppliers to the global lithium ion-battery market. China now produces more cathode for lithium-ion batteries than Japan and Korea combined.
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New lithium producers?
Aside from the world’s top lithium producers, a number of other lithium companies are getting into production as well.
Orocobre (TSX:ORL,ASX:ORE) continues to ramp up lithium carnobate production at its Olaroz lithium facility in Argentina. The company put out 2,332 tonnes of the material in Q1 2016, in line with its 2,400 tonne target for the quarter. Orocobre is targeting 3,000 tonnes of production for Q2.
Meanwhile, Galaxy Resources (ASX:GXY) reported last month that it’s partner, General Mining (ASX:GMM), had recommenced mining operations at Galaxy’s hard-rock lithium mine in Western Australia. The project is fully funded through an initial optimization phase via offtake payments, and first delivery of concentrates to the company’s Chinese customers is expected to take place in July or August.
Beyond that, there are plenty of lithium juniors looking to develop projects and become lithium producers as well. Two have signed conditional supply agreements with Tesla Motors’ (NASDAQ:TSLA) (Bacanora Minerals (TSXV:BCN,LSE:BCN)/Rare Earth Minerals (LSE:REM), and Pure Energy Minerals (TSXV:PE)), while many more are converging on the prolific Clayton Valley.
However, analysts and market watchers have cautioned that only those who can reach low costs of production will be able to compete with the world’s current top lithium producers.
What should investors be watching?
Tesla’s supply chain has gotten plenty of focus from the press, but it’s worth remembering that, at least for now, the cathode for Tesla’s batteries is made in Japan. Companies in the country make nickel–cobalt–aluminum (NCA) cathodes for Panasonic (TSE:6752), the maker of battery cells for Tesla.
As a final note, while Tesla is certainly a major demand driver for the lithium space, Lowry believes that Tesla tends to obscure demand growth in China.
Certainly, China is not only a heavyweight in terms of lithium producers, but is also big for demand as well. The country has had significant growth in cathode going to all segments of the battery market, including consumer electronics, grid storage and transportation applications such as e-bikes and buses.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Joe Lowry was employed by FMC from 1989 to 2012. His most recent title was Global Sales and Business Development Director — Lithium.
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