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The Challenging
Scenario in
the Lithium EraDavid Klanecky
VP Lithium Upstream Division
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Challenge: Macro Trends Driving Lithium Growth Opportunity
Health
• Aging population
• Pharmaceutical synthesis
• Increased respiratory distress and illness
Salts
Specialties
Mobility
• Battery performance, cost and safety
• Demand for mobile devices and tools
• Electrification of transportation
Salts
Electrolyte Additives
Metal
• Power grid efficiency and renewable use
• Weight reduction in aerospace and large
format transport (metals and plastics)
• Friction reduction (grease and eco-tires)
Salts
Metal
Organometallics
Energy
Efficiency
2
Lithium is a Key Enabler to Solving Global Issues
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Li-Ion Batteries Enabled Consumer Product Innovation
3
1992
1st Mass
Produced Li-
Ion Battery
Cell
2007
iPhone
debuts
Smartphones | Tablets | Laptops | Wearables | Power tools
2003
Cell phones
become
mainstream
In 5 years, Li-Ion batteries went from a niche end-use to the #1 consuming market for Lithium with
explosive growth from consumer electronics and expansion into additional consumer devices:
power tools, lawn and garden equipment, forklifts, golf carts, etc…
Future Growth Driven by Expanded Use of Batteries in Numerous Consumer Devices
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Battery Market Expectations
Consumer Electronics (CE)CAGR (2016-21): ~8%LCE Content: < 0.1 kgs
Battery Markets Continue to Accelerate Lithium Demand
Source: Based on Internal Albemarle Demand Model and third-party data
Transportation (EV, Trucks/Buses)CAGR (2016-21): 32 – 35%LCE Content: 40 – 100 kgs
Grid Storage (ESS)CAGR (2016-21): > 40%LCE Content: > 1,000 kgs
4
EV Sales grew 58% in 2017
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BEV, PHEV,
HEV
Battery Electric Vehicles Value Chain Enabled by Lithium
5
Li Carbonate
Li HydroxideCathode, Anode,
Electrolyte
Cylindrical,
Pouch, Prismatic
xEV, PEV,
ESS, CE
Performance Products
BatteryComponents
BatteryCells
BatteryPacks
EV Manufacturer
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Clutch
Conventional
Internal Combustion
Engine Power flow
Internal
Combustion
Engine
TransmissionDrive
Shaft
(Plug-in) Hybrid Electric
Parallel Power flow (Toyota Prius)
Internal
Combustion
EngineTransmission
Drive
ShaftLithium
Battery
Clutch
Lithium
BatteryElectric
MotorTransmission
Electric
Motor
Extend Range Electric
Series Power flow (Chevrolet Volt,
BMW i8)
Lithium
Battery
Electric
MotorTransmission
Battery Electric
Vehicle(Tesla, GM Bolt)
Lithium Use Grows with Automotive Technology Evolution
Internal
Combustion
Engine
Electric
Generator
Clutch
6
ICE
PHEV
PHEV
BEV
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Continued Declines in Lithium Ion Battery Costs Expected
Source: Bloomberg New Energy Finance Summit (April 2016)
• According to a well known
automaker, lithium ion battery
costs declining to that of an
internal combustion engine
($100/KWh) is “…achievable
by 2025”
8
Many Auto Companies are pursuing larger Electrification Strategies
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Electric car models by style and range through 2020
9
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New Battery Materials Will Involve Lithium
10
Battery Type Market Share in Transportation
No Disruptive Non-Lithium Energy Storage Technologies on the Horizon
Source: Lux Research 2016 Report
Considerations Driving
Continued Innovation
in Battery Design:
• Safety
• Cost
• Power
• Durability
• Energy Density
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Demand Outlook – Thoughtful & Comprehensive Approach
11
0%
5%
10%
15%
20%
400 600 800 1.000
EV
Pe
ne
trati
on
Total Lithium Demand (kt LCE)
ALB Outlook
2025 EV and Lithium Outlook1 Demand Buildup by Application
1Includes estimates from Roskill, BMO Capital Markets, Citi Investment Research, Deutsche Bank, Goldman Sachs, Instine|Numora (America), Morgan Stanley, UBS, Oppenheimer, SQM, and FMC2Includes grid storage or ESS volumes
Demand in kt LCE
Application
2017
Demand
’17 – ’25
CAGR
2025
Demand
Transportation 50 35% 550
Consumer Electronics2 60 8% 110
All Other/Industrial 110 3 – 4% 140
Total 220 ~18% 800
Key EV Demand Inputs• 12.4% EV (BEV + PHEV) penetration in 2025
• 51 kWh EV battery; 13 kWh PHEV battery
• 0.85 kg LCE/kWh for cathode; 0.10 kg LCE/kWh
electrolyte
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Supply to Remain Relatively Balanced versus Demand
• Relative size of lithium profit generation and resulting equity valuation
• Duration of resource quotas and time to earn returns on capital deployed
Established majors have strong incentive to commission capacity as demand warrants
• Brine and hard rock sources are all different and therefore require unique extraction and process technology development
New brine projects typically take 10 years to reach quality product levels
• Sets pricing floor in low teens USD per MT
Market needs high-cost hard rock capacity to meet accelerating EV demand
• Technical and processing challenges to making battery grade (BG) product for EV’s
• Some lower quality resources and conversion capacity unable to economically achieve BG quality requirements of automotive industry
Experience curve for new entrants to produce EV grade
12
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The Challenging
Scenario in
the Lithium EraDavid Klanecky
VP Lithium Upstream Division
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