Chemical producer SQM has shipped its first load of lithium hydroxide from a new plant at Salar de Carmen, Chile, bringing a fresh source of supply to what company officials and others call a very tight market. Lithium hydroxide monohydrate is the key ingredient in making lithium soap greases, which account for 72 percent of lubricating greases worldwide.
This is the largest lithium hydroxide plant in the world, as well as the first new plant on the global scene in about 20 years, according to SQM Product Manager Alejandro Echeverria. The $15 million plant has initial capacity to produce 6,000 metric tons a year of lithium hydroxide, and its first deliveries are slated to reach the U.S. East Coast around Dec. 12.
Global demand for lithium hydroxide has averaged 4 percent to 5 percent annual growth since 1999, the Santiago-based executive pointed out, with lithium batteries being the fastest-growing application. Lubricating greases, however, are a reliable and longstanding outlet for the chemical, accounting for about 85 percent of lithium hydroxide use and 17 percent of SQMs overall lithium chemical sales.
Before this new plant opened, SQM supplied lithium hydroxide from two other sources. It shipped lithium carbonate from Chile to third-party processors in China and Russia, who converted it into lithium hydroxide, which then was shipped to customers. SQM also acquired stocks of lithium hydroxide from Toxco – part of a strategic reserve once held by the U.S. Department of Energy. That stockpile is nearly depleted now, so the plant in Chile will help replace it as well as the tolling production in Russia and China.
Having an integrated hydroxide process will give us an advantage, Escheverria said, because well not be shipping lithium carbonate out for processing elsewhere and then shipping lithium hydroxide to the customers. SQMs integrated process should also enable better quality control and supply chain coordination, he indicated.
SQM produces lithium by pumping brine from beneath the saline crust of earth under Chiles Salar de Atacama. The brine is concentrated in massive solar evaporation ponds above ground, then transported to Salar de Carmen on the coast for processing into lithium carbonate.
SQM has produced lithium carbonate this way since 1997. Until then, the market was dominated by FMC Lithium and Chemetall Foote, but SQM quickly cracked it open. Its hot pursuit of market share led to a 50 percent drop in lithium carbonate prices, and it wasnt until the end of 1999 that prices began to firm up again, Chemical Market Reporter noted at the time.
In 2000, SQM moved aggressively down the chemical chain into lithium hydroxide, where despite needing to have its lithium processed in China and Russia, it again rapidly took market share. Today, SQM claims 41 percent of the worlds 75,000-metric-ton-a-year market for lithium chemicals (measured as lithium carbonate equivalent), and 35 percent of the market for lithium hydroxide.
Lithium greases were already the preferred grease type world over, and they took a nice uptick after SQMs entry. From 1985 until 2000, lithium greases were roughly 60 percent of global demand; they now account for 72 percent of the global market, according to the latest Lubricating Grease Production Survey from NLGI International.
The new plant in Chile should improve SQMs cost position again, especially as demand remains strong. There was some overcapacity in those early days, but now all the suppliers are at full capacity, Escheverria remarked. So now its time to have our own plant.
We knew when we started out that wed have to make lithium hydroxide ourselves someday, remarked Sarah Doherty, sales manager at SQM North America in Atlanta, Ga. Lithium growth has been much more than we predicted.
Grease manufacturers reportedly are making more lithium complex greases as well, sources at grease companies and additive suppliers indicate. About 20 percent of lithium grease sales now are higher-performing complex varieties, versus only 16 percent of the total when SQM came on the scene. The switch from simple lithium greases to complex requires at least 10 to 15 percent more lithium hydroxide to beef up the soap structure, and up to 50 percent more in some cases.
As with other raw materials, Chinas appetite has been a factor, too. It consumed 8 percent of global lithium carbonate equivalent two years ago – and now it takes 13 percent of the total, said SQM North America Sales Director Eduardo Martinez, based in Santiago.
If you look at the grease markets in North America, Europe and Japan, lithium soap greases amount to a significant share of the total grease market, Martinez said. But there is a lot of potential for increasing lithiums share of the grease market in the Far East, China, India and Latin America.
In a presentation to analysts in September, the company said it expects to see lithium price recovery in the short term – and perhaps additional production capacity opening in China, thanks to the new pricing environment. Still, SQM expects to attain similar sales volumes for lithium for 2006 and 2007, and then to see sales volumes grow from 2008 onward. The most explosive growth in demand will come from lithium batteries.
SQMs other principal products are specialty fertilizers such as potassium chloride, nitrates, and iodine. Lithium represents 9 percent of the companys worldwide revenues, which totaled $852 million in 2004. Its revenues in 2005 will be about $900 million, it said.