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Here’s Where Tesla’s Supplier Says The Lithium Market Is Heading

(Bloomberg) -- While a supply shortage still looms in the lithium market next decade, the industry should brace for further volatility into next year, according to Wang Xiaoshen, vice chairman of Jiangxi Ganfeng Lithium Co., which is forecast to become the second-largest producer from this year.

The supplier to Tesla Inc. and BMW AG fell as much as 28 percent on its debut on the Hong Kong Stock Exchange Thursday amid turbulence in the lithium and boarder markets. Its Shenzhen shares tumbled to their daily limit for a second day. In anticipation of industry expansion, Ganfeng is developing its battery interests and sees challenges ahead for new entrants, Wang said in edited highlights of an interview on Oct. 9.

On lithium’s future

We think that the near future -- until middle of next year -- will be volatile, for several reasons. On the supply side, there may be some new spodumene suppliers coming on in the next several months. On demand side, some of the new car projects could be delayed. However, Tesla is another important factor in near-term demand. It looks like the Model 3 is now ramping up steadily and we think their purchasing should be very strong -- not like the start of this year.

Here’s Where Tesla’s Supplier Says The Lithium Market Is Heading

On risks

The risk is that the market is overestimating the potential on the supply side. Of course there is room for newcomers, but they will likely have lots of problems with production. They (investors) are scared because they realize this industry still has lots of barriers, even in the upstream. You need the technology, you need of course the market -- it’s very challenging for some new entrants to become qualified battery-materials suppliers.

On the prospect of a supply squeeze

Not in the near term, but in the longer term there is still risk of a shortage. Especially 2023 and 2024 -- that’s the period we’re a little bit concerned about. That will be the time when EV production will be ramping up quickly and that’s when most of the battery makers will be expanding their capacity. The OEMs want to secure long-term supply. They probably share the same view that come 2023-2024 there will be tight supply when everyone is ramping up the EV production. But in the short term we have to fasten our seat belts and be careful.

On solid-state batteries

NOTE: Solid-state batteries are a potentially safer and higher-performance alternative to lithium-ion batteries that use solid metal instead of liquid chemicals. More from Bloomberg NEF here.

We are targeting production of the first generation solid-state batteries from the second quarter next year. We are already starting some testing work with several Chinese and European manufacturers. We think we can support a few thousand EV cars and then we will make a decision on how we want to scale up this technology. From this technology to the next level, there’s still another eight or 10-year window for that. Our first generation is a drop-in technology in which we replace the liquid electrolyte.

We are quite advanced compared with our peers. There are two groups currently. One is the existing battery makers. They are more focused on their current technology, which they are trying to improve bit by bit. There are many start ups, but they just do not have enough years experience and it will take them three to four years or more before before they can reach our level.

Here’s Where Tesla’s Supplier Says The Lithium Market Is Heading

On research

Our solid-state battery base is in Ningbo. The whole team just joined Ganfeng in 2016 (from a national-level technology research center there). It’s about 80 people and the leader has been working on solid-state since 2001. Besides that we have bought all the institute’s patents for this technology.

On whether Ganfeng may become known as battery company?

That’s possible. But we don’t have the resources to support the whole world and it’s impossible do this by ourselves. We still think its a good idea to work together with other battery makers. The lithium industry needs to create new demand and we want to be active in creating new demand.

On his early career days

After university in 1990 I worked nine months on the production line at the Xinjiang Lithium Plant in my home province. Conditions there were very poor, very dusty. Every day I found some new little marks on my skin because when you sweat, the moisture reacts with the hydroxide particles in the air and hurts the skin. Our factories now are totally, totally different but I still remember those working conditions very clearly.

To contact Bloomberg News staff for this story: Martin Ritchie in Shanghai at mritchie14@bloomberg.net

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