Australian merchants gamble on China's lithium battery market

China's lithium battery market has attracted the attention of overseas lithium companies. The main driving force behind this is the humble electric bicycle battery.

On March 7, Australian Zhangjiagang plant of Galaxy Resources, an Australian listed company, went into operation. After the plant is put into production, Galaxy Resources will become the largest battery-grade lithium carbonate producer in the Asia-Pacific region, producing 17,000 tons of battery-grade lithium carbonate annually.

Lithium carbonate is a key raw material for positive and negative electrode materials and electrolytes of lithium-ion batteries. It was first used in computers and mobile phones. Iggy Tan, managing director of Galaxy Resources, predicts that in the future in the field of electric bicycles in China, replacement of lithium batteries for lead-acid batteries will emerge.

China is now the world’s largest user of electric vehicles. According to statistics, China currently has an annual output of 30 million electric bicycles, most of which use lead-acid batteries, and lithium batteries account for less than 3%.

Tan Yiji stated that if this figure can rise to 20% by 2015, and that the annual production will remain unchanged at a scale of 30 million, this would amount to 6 million vehicles. This figure may rise to 50% by 2020. According to the electric bicycle's 1 kilowatt-hour capacity, each car needs roughly 1-2 kilograms of lithium carbonate.

“Our current calculation does not include the future demand for electric vehicles and the demand for energy storage batteries. The demand for the next 10 to 20 years will be very large,” said Tan Yiji.

Let Tan Yiji confident, believe that lithium batteries can replace lead-acid batteries, one of the reasons is the improvement of China's environmental protection requirements. Due to the non-compliance of the production process of some manufacturers and the lack of recycling, the pollution caused by lead-acid batteries will become more and more serious.

In May last year, the “Circular on Strengthening the Pollution Prevention and Control of Lead Batteries and Recycled Lead Industry” issued by the Ministry of Environmental Protection of China released the environmental protection storm in the lead-acid battery industry, and a large number of medium and small lead-acid battery factories were shut down. In early March of this year, the Ministry of Industry and Information Technology released the “Leading Battery Industry Access Requirements (Consultation Draft)”, which significantly increased the industry's threshold.

Another reason for Tan Yiji's self-confidence is that lithium batteries, whose prices are still high, have gradually narrowed the price gap with lead-acid batteries.

“A few years ago, the price of lithium batteries was 10 times that of lead-acid batteries, and now it has fallen to 2-3 times in China. Considering that lithium batteries can be charged and discharged more than 1,000 times, once a day is almost three years, and Lead-acid battery life is mostly in one year, just look at this point, lithium batteries already have certain advantages." Tan Yiji said.

For Tan Yinji’s Galaxy resources, the resource advantages make it relatively calm in China's pricing.

The Cattlin mine, which the company is developing, is said to be located in Western Australia and is currently the second largest spodumene deposit in the world, with a proven reserve of 18 million tons.

The reason why Galaxy Resources explains that the main reason why it does not sell resources is that lithium salt is different from iron ore, and its proportion in the final product is small. With such a quantitative relationship, the $1 lithium salt, when processed into lithium carbonate, has a value of $3, and the value after processing into battery materials is $44, and the value after processing the battery can reach over $500. The proportion of lithium in the final product may not reach 5%, but it is the core of all elements.

In addition to accessing the demand market, Galaxy Resources invests in China. The lower cost is the key consideration. “In Zhangjiagang, our factory is only 400 meters away from the terminal and the logistics cost is low. At the same time, Zhangjiagang Chemical Industrial Park is well-supported, and the prices of sulphuric acid and caustic soda are cheaper than building factories in Australia,” said Tan Yiji.


Of course, as a latecomer, Galaxy Resources will also have to meet the challenges of Chilean SQM, German Chemetall, and US FMC that account for 65% of global lithium carbonate market capacity.

Tan Yiji stated that in the Chinese market, the above-mentioned manufacturers’ share is only a single digit. They often only set up an office or sales department. In addition, the above-mentioned manufacturers' products are mainly industrial grade, and the battery grade is relatively low. “We only make battery grade and battery grade products. Our lithium content is 99.5%, 99.9% and 99.99%. We are the main attacker. In the Chinese market, the three countries only regard the Chinese market as a part of the market, rather than the main body."

According to Tan Yiji, at present, the company has signed a long-term sales agreement for its 100% capacity product. It has reached a long-term agreement with Mitsubishi Corporation and 13 major lithium cathode materials manufacturers in China, adopting quarterly pricing.