Welcome back everyone!
I’m Jordan Giesige and this is The Limiting Factor.
This video is the fourth section of a full two hour long video on The Global Lithium
Supply Chain that’s currently available for paid supporter on Patreon, YouTube, and
X.
In the last video I walked you through all the potential regions and sources of mined
lithium supply and how much we might expect lithium supply to exceed the forecast from
each of those regions and sources.
Today I’m going to take that information and use it to create an updated global lithium
supply forecast.
From there, we’ll explore forecasts for sodium ion battery supply and use that information
to develop a full and final forecast for battery supply from both lithium and sodium ion batteries.
With that forecast in hand, in the next video of the series we’ll look at what the total
global battery supply forecast could mean for Tesla’s growth later this decade.
Before we begin, a raft of credits and thanks are in order.
Feel free to skip this part of the video and move to the next timestamp if you watched
the previous video.
I’m including the thanks and credits on each video in the series for the people who
haven’t seen the other videos.
That’s because it’s not just a thanks, it lets viewers know the quality of my sources
and peer review.
First, Vivas Kumar reviewed the draft script.
Vivas was directly involved with Tesla’s Battery Supply Chain for nearly three years,
where he negotiated billions of dollars of materials spend and also did strategic analysis
and forecasting for battery materials.
After that, he worked for Benchmark Mineral Intelligence for nearly three years.
He’s now co-founder and CEO of Mitra Chem. If you’d like to know more about that, check
out my interview with Vivas and Chirru.
Next, my sources.
Rodney and Howard of RK Equity, a lithium analysis and advisory firm, spent a several
hours and long email threads answering detailed questions about mine development.
If you’re interested in their work, you can connect with them on Twitter with the
details on screen or follow the Rock Stock Channel on YouTube.
Cameron Perks of Benchmark Mineral Intelligence walked me through how lithium supply and demand
is evolving over time.
I recommend following Benchmark Mineral Intelligence and their CEO Simon Moores on Twitter to keep
up to date with the lithium industry.
Lars Lysdahl provided key data for this video around lithium refining capacity vs production,
and beyond that, I’ve used a number of graphs from Rystad Energy over the years.
You can also follow Lars on Twitter.
Austin Devaney helped me put a finer point on a few topics around hard rock lithium mining.
Austin was an executive at Albemarle and Rockwood Lithium for nearly ten years, which is one
of Tesla’s largest lithium suppliers, and now has been at Piedmont lithium for the past
3 years, which has an agreement for future supply to Tesla.
Bradford Ferguson and Matt Smith of Rebellionaire.com reviewed the final release candidate of the
video from an investor lens.
Rebellionaire specializes in helping investors manage concentrated positions.
They can help with covered calls, risk management, and creating a financial masterplan from your
first principles.
Bear in mind, this video is not investment advice and always do your own research
Finally, despite all the input I received from some of the leading experts and information
sources in the lithium industry, all the opinions in this video are my own.
There are differing views and forecasts within the lithium industry that I had to reconcile
and combine with my own insights and expectations.
With regards to the peer review, it was for factual accuracy and sanity check rather than
for crafting the tone and conclusions of the video.
Overall, my goal was to create the most comprehensive resource out there on how global lithium supply
and battery supply will evolve this decade and how that relates to Tesla.
So if you feel like I’ve hit the mark and get value from the video or my content in
general, toss a coin to your Witcher.
Making a video like this takes months, and generally, analysis like this would be packaged
up by an analyst house and put in a report that costs thousands or even tens of thousands
of dollars.
Generally I make about $200-600 per video in YouTube ad revenues.
That is, it’s the direct support that I get from less than 1% of subscribers through
Patreon, YouTube, and Twitter that makes the channel possible.
The details for support are in the description.
Picking up where we left off in the last video, I’ve made this table showing what I view
is the realistic potential upside from Benchmark Mineral’s supply forecast data for each
lithium producing region in 2027 and 2030.
The Benchmark forecast for lithium supply in 2030 is 3.5 TWh.
Based on the country by country walk through for mined lithium supply in the last video,
I added 1 TWh from China, .4 TWh from Africa, and then .1 to .2 TWhs each for the rest of
the regions.
That means a total lithium supply of 5.4 TWh in 2030 vs the 3.5 TWh currently forecast
by Benchmark, which is a 55% increase.
So by my estimate, global lithium supply comes up 29% short of Benchmark’s 7.6 TWh high
case demand scenario in 2030.
That’s not the end of the world of course because total lithium supply will still increase
by about 4x in the next 7 years, it just means that due to a lack of mining investment we
may not see the 5-6x growth that could have been possible.
Note that so far, we’ve only covered lithium ion batteries.
In a moment, we’ll factor in battery supply from sodium ion batteries as well.
Before we move on to that, it’s worth pointing out some of the assumptions that went into
this table beyond what was discussed in the country by country walk through:
First, for Australia, South America, the United States, and Canada, I said that we shouldn’t
expect large increases in mined lithium supply in the next 4-7 years.
I dealt with that by assuming that there would be no additional supply from those countries
in 2027 and then .1 to .2 TWhs each in 2030.
That’s because for those countries, the lead time for a new mine is at least 4 years
and we’re already more than halfway through 2023 so there’s not much opportunity for
potential upside in 2027, but in 7 years by 2030 there’s a pretty good chance we see
some new capacity come online.
Second, I set the 2027 numbers for China and Africa at half the 2030 numbers that we discussed
in the country by country walk through.
That’s because I assumed they’ll see typical s-curves for growth where scaling becomes
more difficult at higher material volumes.
Third, the 7.6 TWh demand figure is just a guidepost.
That’s because there’ll be actual demand for lithium and latent demand for lithium.
What do I mean by that?
The 7.6 TWhs of demand is from factories that have already been announced.
If I’m forecasting 5.4 TWhs worth of lithium supply, that means some factories simply aren’t
gonna be built because there won’t be enough lithium to feed them.
But beyond that, those factories will need a large amount of other materials, skilled
workers, and machinery.
So there’ll be actual lithium demand from the factories that get built and latent demand
waiting in the wings when enough lithium, other materials, skilled workers, and machinery
are available.
So although with further gigafactory announcements latent demand could be over 10 GWhs in 2030,
I’ve adopted Benchmark’s high demand case of 7.6 TWh for 2030 as a guidepost for actual
demand.
But, all we really know is that lithium demand will likely exceed supply.
It could happen that skilled workers and machinery end up being the bottleneck instead of lithium,
but in my view that’s unlikely for two reasons: First, because the lead times for upskilling
workers and building machinery are shorter than the lead time for building a mine.
Second, because the lead times to permit, build, and commission chemical processing,
cathode production, and cell manufacturing are all shorter than mining.
Other materials could be the bottleneck as well, but I covered that off in the first
of the series – lithium is working off the smallest base has to grow the most.
But if I’m wrong and lithium isn’t the bottleneck, the net effect for Tesla and the
transition to sustainable energy would be the same: A more linear rather than exponential
growth rate.
Before we move on and while we’re on the topic of the ways that I could be wrong, I’d
like to emphasize that the odds of my forecast being correct here, or even within 5% of correct
is low.
With that said, although my primary goal for this video series was to make the best forecast
I can, there were also two secondary goals.
First, I laid out my thought process and sources in detail so that if you disagree you can
build on or tweak my thinking based on your own assumptions.
I’m not handing down stone tablets here, but rather giving you the tools to make your
own.
Second, as much as possible, I’ve tried to offer useful information and insights to
help you understand the lithium landscape, which hopefully, if you’ve made this far
in the video series, you’ve gotten.
However, we’re not done yet.
As I’ve said in past videos, I expect Sodium ion batteries to hit the market in force in
the late 2020s.
There’s no telling what the actual ramp could look like, but if Sodium Ion batteries
are everything they’re advertised to be, the ramp will be aggressive.
Let’s look at the production estimates that I’ve seen for Sodium Ion, from lowest to
highest, and then we’ll look at my forecast, or more accurately, guesstimate, because everyone
is just guessing at this point.
First Wood Mackenzie, which estimates 40 GWh of sodium ion production in 2030 for their
base case with another 100 GWh possible if Sodium Ion has a good launch by 2025.
In my view, that estimate is so low that it can effectively be thrown out.
That’s because there’s already 80 GWh of production capacity planned by 2025 and
about 150 GWh planned by 2030.
Second is ICC Sino, which is expecting 165 GWh by 2026.
I place the most trust in ICC Sino’s estimate because it’s directly from a Chinese analyst
house that’s keeping close tabs on announcements and developments in China.
The third estimate is from Frank Wunderlich who’s an active proponent of Sodium Ion.
Frank is predicting a run rate of 100 GWh of Sodium Ion batteries by the end of next
year, which is 18 months away.
And by the end of 2025, he’s predicting a production capacity of 300-400 GWh per year.
However, he doesn’t state what he expects the actual production run rate to be.
Given that it’ll take time for that capacity to ramp, I would assume the actual production
rate would be about 50% of capacity by the end of 2025, meaning a 150-200 GWh run rate
if things go really well.
2701, ICC Sino expects 66 GWh of total production
in 2025 which would mean a production run rate of about 100 GWh at the end of the year.
That is, Frank is predicting a production growth rate of roughly 50-100% greater than
ICC Sino; a 150-200 GWh run rate by the end of 2025 vs 100 GWh.
In my view, given that the end of 2025 is only 30 months away and we’re essentially
working from a base of zero, 150-200 GWh is overly bullish.
Unfortunately, neither ICC Sino nor Frank is providing an estimate for 2030.
For that, let’s turn to my forecast slash guesstimate.
My bull case scenario is for 160 GWh of sodium ion in 2026.
From there, I factor roughly 60% growth per year from 2027 to 2030 for a total of 1 TWh
of sodium ion battery supply in 2030.
Given that sodium is available in huge quantities and therefore sodium ion batteries don’t
have the same primary constraint as lithium ion batteries, why haven’t I forecast a
more aggressive ramp?
It's because although Sodium Ion batteries aren’t as constrained by raw materials,
their growth is still limited by the speed that the entire supply chain can be scaled.
Sodium is plentiful, but it still needs to be refined into high purity battery grade
sodium, combined with other chemicals to form the cathode, and then manufactured into a
battery cell, and that’s just on the cathode end.
Supply chains are also required for the separator, electrolyte, anode, and electrode foils.
All-in-all, each battery cell factory requires 2-3 dozen factories to support it, and every
one of those factories has to ramp in unison.
Furthermore, as I said earlier, all of the forecasts are dependent on Sodium Ion delivering
on what’s been promised by the industry hype.
So far, it’s untested and unproven at scale.
That is all the forecasts, including mine, are generously assuming that sodium ion will
deliver on all the hype and there aren’t any hidden drawbacks for the chemistry that
would hamper it’s adoption.
Moving along, let’s take my forecast of 1 TWh of Sodium Ion battery production by
2030 and add it to the lithium ion forecast I showed earlier to arrive at battery supply
from all sources.
The result is 3.8 TWh of total battery supply in 2027 and 6.4 TWh of total battery supply
in 2030.
That means a relatively reasonable growth rate of about 30% per year for the rest of
the decade.
However, it still leaves a supply gap at the end of the decade of about 1.2 TWhs, despite
some pretty aggressive assumptions.
Let’s review those assumptions before moving on:
First, the sodium ion industry has to grow from non-existent to the size of the current
global lithium ion battery industry in within 7 years.
Second, companies from Australia, South America, North America will have to announce 500 GWh
worth of new greenfields mining projects.
In order to hit production by the end of the decade, on an aggressive timeline, all that
mining capacity will have to be announced in the next 2-3 years.
Third, China will have to build an additional 1 TWh worth of mined lithium production by
2030.
That means continuing to expand production at an average annual growth rate of around
40%, which will only happen if lithium prices are high enough for long enough to encourage
aggressive growth of Chinese lepidolite production.
Fourth, Africa has to go from producing about 70 GWh of lithium to about 700 GWh in 7 years.
Given the instability and unique challenges of Africa such as poor infrastructure, that
would be impressive.
Fifth, politicians, regulators, and the general public in each country will have to play ball.
It’s not uncommon for new mining projects to get caught up in red tape and public pushback
for several years or even blocked entirely.
The odds of at least two or three of these assumptions playing out in support of the
6.4 TWh supply forecast is decent, but the odds that all five will, is possible but unlikely.
That is, the 6.4 TWh forecast is on the bullish side.
However, the bullishness is intentional, it’s to show that even with a bullish forecast,
battery production from lithium, sodium, and recycled materials still appears comes up
short against potential demand.
In the next video of the series, with a strong base of information and analysis in place
from the last 4 videos, I’ll walk you through what everything we’ve learned could mean
for Tesla’s growth later this decade.
That’s all for today, but before I close out the video, as I said at the beginning
of the video, if you can, toss a coin to your Witcher.
The information I’ve provided today is to my knowledge, the most comprehensive video
on lithium supply out there.
Other reports that are available on the market can cost thousands of dollars and by comparison,
if this video does well, I expect it to make less than $1000 from YouTube ad revenues.
It’s the supporters who contribute directly that make the channel possible.
On that note.
A special thanks to my YouTube members, X Subscribers and all the patrons listed in
the credits.
I appreciate all your support, and thanks for tuning in.