Those who follow the market for lithium, which is evolving into a strategic commodity, have been predicting an oversupply in the years ahead. However, Tesla’s planned battery Gigafactory may consume as much as 17 percent of the world’s current output, benefiting producers like Rockwood Holdings (NYSE: ROC), according to Goldman Sachs Group.
Tesla’s appetite for the light white stuff could eventually require the equivalent of 15,000 to 25,000 tons of lithium carbonate annually, Goldman analysts led by Robert Koort said in a report this week. Bank of America estimated in February that the Gigafactory would use 9,000 tons a year.
“We continue to see a near-term oversupply scenario as likely,” Koort wrote. “An inflection in pure battery electric vehicles may help ease oversupply of lithium around 2020.” Galaxy Resources Ltd. (ASE: GXY)’s decision not to resume production in Mt. Cattlin, Australia, also contributes to the tighter supply outlook, he said.
Princeton, New Jersey-based Rockwood is “positioning for an electric vehicle inflection,” Koort said. It has been divesting units to focus on lithium products and surface treatments, and recently agreed to form a joint venture with China’s Chengdu Tianqi Industry Group, in order to get a stake in Talison Lithium Pty.