According to a recent article in the Wall Street Journal (subscription required), Toyota Tsusho, a supplier to Toyota Motor (which also owns 21.8% of the company), has agreed to invest between $100 million and $120 million for a 25% stake in a lithium (Li) mining project operated in northern Argentina by the Australian-listed company, Orocobre. Toyota Tsusho will also pay for the completion of a feasibility study this year. To help finance the deal, Japan Oils, Gas, and Metals National, a state-owned Japanese corporation, is giving Toyota Tsusho low-cost loans in order to secure a steady supply of Li to Toyota Motor.
This kind of deal will help cement the dominance of Panasonic, Toyota’s partner for electric vehicle batteries. The companies have a JV called Panasonic Electric Vehicle Energy (PEVE). While only 27% of the world’s Li supply goes to batteries today, batteries are the fastest growing use for the alkali metal, and Japanese chemical companies like Mitsubishi Chemical and Sumitomo Chemical, as well as some Chinese buyers, are all interested in acquiring stakes in Li producers. However, while Chinese battery makers like BYD enjoy a significant domestic supply (according to the most recent U.S. Geological Survey, China was the third largest producer of Li in 2008), Japanese companies must move quickly to make sure their supply is not disrupted.
After Chile, Argentina is the largest South American source for the metal; and, unlike Bolivia, which has the greatest reserve base in the world, Argentina’s government is relatively stable. Considering that battery price is already the most significant factor in whether plug-in hybrid vehicles (PHEVs) and all-electric vehicles (EVs) will be successful (see the Lux Research report, “Unplugging the Hype around Electric Vehicles” – client registration required), expect more major automakers to work on securing access to Li, lest they find themselves at the mercy of fluctuating commodity prices. The wild card? Innovative companies like Simbol Mining might find a way to flood the market with low-cost Li, but unless and until they do, expect aggressive attempts to secure Li supply.
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