Lithium executive explains why demand is exploding
Everlight Resources Managing Director Humberto L Caldelas tells The Capital Network’s Lelde Smits about the global lithium industry, supply/demand dynamics and outlook.
The Capital Network: Hello I’m Lelde Smits for The Capital Network and joining me from Everlight Resources is its Managing Director, Humberto Caldelas. Humberto, welcome.
Humberto L Caldelas: Thank you, happy to be here.
The Capital Network: Humberto you are a chemical engineer, you’ve been one for almost three decades, you’ve also got experience in the lithium industry. We’ve seen the price of lithium jump about 100% over the past year. Why are we seeing this price explosion?
Humberto L Caldelas: Well historically the demand for lithium products and lithium carbonate has far exceeded the supply. So that, carries with it the need to increase prices, or better yet what we are doing, fulfilling and putting more supply out there in the market.
The Capital Network: So Humberto we’ve had Elon Musk’s Tesla Motors Inc’s (NASDAQ:TSLA) really shine a spotlight on lithium. Can you explain the connection and also why investors really can’t get enough of it.
Humberto L Caldelas: Sure, so as you are aware he owns Tesla. Tesla is an electric car manufacturer, and being an electric car it does consume lithium hydroxide, which goes into the battery to power the vehicle. So that has been a primary reason for the explosion for the demand of lithium worldwide.
The Capital Network: Could you explain the supply demand situation with lithium and how that is expected to evolve over the coming years?
Humberto L Caldelas: Yes, the supply/demand imbalance will continue to exist for several reasons. The applications and uses of lithium are expanding beyond the electric car battery – Such as, metal alloys, pharmaceutical, so that motivates several applications and several industries that will require more supply to come into the market to fulfil that demand requirement.
The Capital Network: Could you explain to us historically who the major lithium players have been?
Humberto L Caldelas: Well yes, historically it has been FMC Corp (NYSE:FMC), Albemaro and Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) that have been satisfying the market. There is a huge lithium presence here in Australia. There is growth in lithium in China, and obviously different players are establishing themselves in Argentina.
The Capital Network: So if we’re looking at investing into lithium and we’ve got someone asking, ‘How do we know what’s good and bad?, what would you advise to them?
Humberto L Caldelas: Well I would advise to them to look at investing in lithium brine opportunities.
The Capital Network: And why is that important?
Humberto L Caldelas: They offer better operational costs, better capital costs and better grade of lithium for processing and application.
The Capital Network: And in your experience what you believe are the biggest mistakes that people are making when looking to invest in lithium?
Humberto L Caldelas: The biggest mistakes people make is not spending enough time in the design, exploration and understanding of the lithium process. There have been a lot of companies that have started up thinking they can fast-track operations, not going through their due diligence, not understanding the lithium content and impurity profile, and that obviously causes problems as they’re trying to process.
The Capital Network: OK now just to re-cap, we have seen these pretty incredible gains in the price of lithium. It’s pretty fair to say we’re in a bull market. Of course the fear is with bull markets that they bust. What are you feeling about the long term prospects for lithium.
Humberto L Caldelas: The long term prospects are great. We should continue to see an imbalance of supply and demand for the next 15-20 years. Again, the focus has been on the electrical car battery and other minor other applications, but lithium has been looked at many many future applications. So, that will continue to drive demand for lithium products.
The Capital Network: Great, so you’re feeling pretty confident.
Humberto L Caldelas: Very bullish.
The Capital Network: That’s good to hear, thank you so much for your insights today.
Humberto L Caldelas: Thank you.