Updated: Aug 19
I want to start by offering a scenario.
It’s 2025 and you are sitting in a Li-ion battery manufacturer. You look out of the production control office and all the lines are stopped. The line workers are sitting on half filled pallets. The plant is NOT running. Meanwhile, in another part of the country, your competition is running. What happened? Both you and your competition use many of the same ingredients, but the competition is not limited to having to have Lithium Hydroxide, instead they invested in the capacity to change the Lithium Carbonate into Lithium Hydroxide. They were not limited to ONLY buying Lithium Hydroxide. You chose to not invest in that capability; now there is an interruption. You had argued that there would be plenty of Lithium Hydroxide. You need to call your spouse because you also know that this is your last day.
The idea of limited supply is a key question to business architecture. It is my argument that battery manufacturers will counteract the possibility above with adding the capacity to change the two. This means they have a wider supply to count on. I think this is already happening. Take a look at these charts from today.
When you see the chart, the cost of Lithium Hydroxide is at a 20.9% premium. This cost difference can also help fund the CapEx cost of adding a capability that will help a company avoid a business interruption. I worked in the automotive sector; questions like this are done every day. You simply can’t afford to have a major liability in the JIT area.
While Lithium Hydroxide may reduce cycle speed, that reduction can not be accompanied with a major threat vector to business continuity.
Long and short. While you read that Lithium Hydroxide is a desired form in battery manufacturing, the realities of interruption will make any battery quality lithium in either form a valid option.
Okay… Who does this impact?
Livent LTHM and Piedmont Lithium PLL. Both are pushing their ‘secret sauce’ is the hydroxide angle. All I am saying is not pushing that these are a ‘no-go’, I am simply saying that there is a truth in industrial management that will negate to a certain degree this advantage.
Standard Lithium (SLI) and other groups are going to offer Lithium Carbonate. Still battery quality.
From July 13 to August 13 Lithium Hydroxide went up around 7.5% while Lithium Carbonate went up around 5%. This shows that you will continue to hear the hydroxide edge argument; but honestly think about this; the cost of batteries will have to be less expensive for margins. If the 20% price difference can be mitigated by a capacity installation that brings down the cost differential to say 12-15% who wins? Lithium Carbonate.
This is my thoughts on the differences especially in terms of EV batteries. Remember these are just thoughts and opinions. Do you own DD. You’ll be more proud of your investments anyway. Thank you for reading… as always, more to come.
Livent NYSE: LTHM
Piedmont Lithium NYSE: PLL
Standard Lithium NYSE: SLI
As always, thanks for reading. I hope this helps. Our goal at Charge Talk is to build understanding so you can understand what you are investing in. Any comments? Hit us up.
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This is not financial advice.