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 May 03, 2015
What Does the Tesla Battery Announcement Mean for Lithium, Graphite and Cobalt?
    Publisher: Cobalt Investing News
    Author: Theresa Matich


Simon Moores: What Does the Tesla Battery Announcement Mean for Lithium, Graphite and Cobalt?

Last Thursday night, Tesla Motors (NASDAQ:TSLA) announced the details of its new line of residential and business-scale rechargeable batteries under the banner Tesla Energy, marking a massive shift for the company.

True to form, Tesla CEO Elon Musk has set a lofty goal with regards to the batteries. He shared his hopes that Tesla's line and others like it will help the world shift away from fossil fuels by facilitating the storage of energy generated from sources like wind and solar.

However, there wasn't much talk about supply-chain specifics --- i.e., how much lithium, graphite and cobalt will be needed for all those batteries. With that in mind, Resource Investing News got in touch with Simon Moores of Benchmark Mineral Intelligence to talk about how Tesla's new batteries may affect the markets for those metals.

A nice surprise

For Moores, the biggest surprise from Thursday night's announcement was the cost of the batteries. He noted that the cost of Tesla's home-use battery, the Powerwall, was expected to come in at over $10,000. That's well above the actual cost of the battery, which is set at $3,000 for the 7kWh model and $3,500 for the 10kWh model.

In the same vein, Moores said that the second thing that stood out was the scalability of the battery systems. "That was really clever from Tesla ... they're making it really easy," he said.

Of course, the $3,500 price tag will still be a price barrier for many, a point conceded by Peter Rive, CTO of SolarCity (NASDAQ:SCTY). "I don't believe this product in its first incarnation will be interesting to the average person," he told the Associated Press.

Still, Moores stated that Tesla has done a good job of addressing that issue. "I think there's always a barrier there because it's such a new thing. Not a new technology, but a new concept ... so people have nothing to compare it to," he said. "The cost is very low still. I think Tesla really got in aggressively on the price in order to start immediate adoption."

No word yet on pricing for Tesla's higher-capacity 100kWh Powerpack batteries, which were also announced on Thursday.

Lithium, graphite and cobalt needed

Of course, the question on every critical metals investor's mind is "how much lithium, graphite and cobalt will the batteries use?" According to estimates from Benchmark Mineral Intelligence, the answer is "a lot." "Tesla hasn't 100 percent confirmed they're the same batteries used in their cars, but they pretty much are," Moores said, "so they will contain a lithium and cobalt cathode --- a NCA (nickel-cobalt-aluminum oxide) cathode --- and graphite as well."

Benchmark expects that to produce each Powerwall, 16 kilograms of synthetic graphite (or 16 kilograms of spherical graphite derived from 40 kilograms of flake graphite concentrate), as well as 12 kilograms of lithium hydroxide, will be required. For the Powerpacks, Moores said those amounts will increase 10 times (about 160 kilograms of graphite and 120 kilograms of lithium). In other words, they'll need slightly more than the amounts of lithium and graphite currently used in Tesla's Model S.

Given those numbers, if demand for the batteries takes off as Musk expects, it could mean big things for critical metals demand. Moores said that while there are enough raw materials in the ground to support Tesla's battery revolution, the key question will be whether there's enough processing capacity and know-how to make battery-grade products.

"The battery-grade products are specialist products. They're not commodities," he pointed out. "There's a lot of expertise that goes into processing these raw materials before they can be used in batteries, and the question is, where does that reside?"

Currently, much of that processing capacity lies in China, Japan and South Korea. Still, Moores noted that China is still "fairly new to the lithium game" and that it still relies heavily on importing raw materials. "There is room in the lithium market," he said, especially for companies aiming to go beyond raw materials to create more specialized products.

Higher demand, higher prices

Increased demand will have implications for lithium, graphite and cobalt prices as well. "You've got increased demand from batteries, which we're already seeing, and that's without gigafactory demand. And more importantly, there's other megafactories being developed in China," Moores said. "When you have such a heavily skewed market on the demand side with little change on the supply side, prices are only going to go one way."

While that might sounds like good news, Moores argued that price volatility isn't actually good for the industry. It can prevent long-term planning and investment, leaving end users without supply and leading to substitutions in the market, as happened to some extent in the rare earths industry. However, Moores isn't worried that what happened with rare earths will happen with lithium, graphite or cobalt.

"There is potential for prices to go higher than they've ever been, but ... I think lithium ion is too far gone. It's too commercialized now," he said, speaking to the possibility of substitution in the near future. "Regardless of the bad news they might get now and again, for whatever reason, it's the most trusted form of battery. For that reason, it's here to stay for a long time, in my opinion."

What does it all mean for juniors?

Still, Tesla hasn't said much about supply agreements for lithium, graphite and cobalt. While Moores suspects the company may need stockpiles ready for its gigafactory by the end of this year, he suggested that Tesla could also continue to source its cells from Panasonic (TSE:6752). "They need to lock up the right volumes of raw materials, and I think they're not going to do a deal unless it's right for them," he said.

When asked whether lithium companies in Nevada will have an advantage in terms of securing supply agreements with Tesla, Moores said that they have an edge by virtue of being on the company's doorstep. However, he stressed that it's more important to consider whether such companies are able to economically produce the right grade of lithium. "The key word is economic, because Tesla is going to be negotiating hard on these contracts," he said. "They want the best deal."

Western Lithium (TSX:WLC), Pure Energy Minerals (TSXV:PE) and Dajin Resources (TSXV:DJI,OTCMKTS:DJIFF) are located in Nevada, along with Rockwood Lithium (now owned by Albemarle (NYSE:ALB)), which controls the only producing lithium operation in the US. Tesla has previously said that it plans to source all raw materials for its gigafactory from North America.

In any case, Tesla's announcement has certainly injected some fresh excitement into the critical metals space. Investors will be keeping an eye out for more developments from the company.

To read the full article please click here to visit

 April 20, 2015
Strength Remains in Cobalt Market on Anticipation of Supply-Driven Tightness
    Publisher: MetalBulletin
    Author: Fleur Ritzema

Excerpts from the MetalBulletin Article

Strength Remains in Cobalt Market on Anticipation of Supply-Driven Tightness

Strength remained in the cobalt market last week, as sellers set their sights higher on an anticipated shortfall due to Chambishi's absence from the spot market.

Sellers felt little pressure to offer aggressively last week, although buyer demand was flat towards the end of the week, sources said.

ENRC's Chambishi operation this month confirmed reports by Metal Bulletin that production of cobalt would stop for three months as a result of feed problems.

Chambishi is the world's biggest cobalt metal producer, selling large volumes of broken cathodes to Asia, the USA and Europe.

Over 1,000 tonnes of metal are expected to be affected by the temporary closure. But the rumour mill was in overdrive last week, as the market speculated about whether the stoppage would last longer than planned, after Tony Southgate, head of the ENRC's cobalt book, was understood to have resigned.

To read more, Sign up for a Free Trial Metal Bulletin Membership or follow on Twitter @metalbulletin

 April 15, 2015
Chris Berry on Cobalt: The Great Enabler in the Battery Race
    Publisher: InvestorIntel for Investors
    Author: Chris Berry


Cobalt - The Great Enabler in the Battery Race

Excerpt from InvestorIntel - April 15, 2015

Chris Berry writes:

With an increasing amount of attention focused on metals used in batteries, several issues have become clear. First, the metals used and resulting chemistries are all over the map implying there is no clear winner. Second, the amount of a metal used in a battery isn't as important as is the cost to procure it. Third, a general lack of transparency in pricing clouds the overall potential opportunities.

Given these challenges, it's a wonder anyone would care at all about the Energy Metals, but it has become increasingly clear that the demand is there. One metal in particular which offers interesting answers to the above issues and deserves more careful study is cobalt.

The USGS puts the total mined production for cobalt at 112,000 tonnes (though refined cobalt production is lower). However, there are numerous downstream cobalt compounds including chlorides, carbonates, and powders used in various applications. This diversity of demand is very important as the metals markets struggle with oversupply. With the overall market demand for cobalt growing at an estimated 6 to 7% per annum, driven primarily by the battery business which uses cobalt chemicals and the aerospace business which uses high purity alloys, the demand story is sound.

The supply side is more of an open question, but industry sources have indicated that the oversupply that is plaguing many of the metals also exists in cobalt. The key question here then is when will the balance tip and a new equilibrium emerge? The current cobalt price would seem to reinforce the oversupply thesis and my own estimates indicate that prices will remain range bound in the intermediate future. That said, one of the real keys to analyzing the cobalt market involves not looking at the metal itself, but other external factors which can influence price and therefore usage. It's no secret that cobalt is, by and large, a byproduct. Approximately two thirds of cobalt production is directly related to copper production, slightly less than one third is related to nickel production, and the remainder (less than 5%) is the result of primary cobalt operations. Given that reality, it seems that both positive and negative catalysts for the copper and nickel markets should be more scrutinized than those only in the cobalt space. As an example, forecasts of slight oversupply in copper heading in to the second half of this year will weigh on cobalt pricing.

Additionally, with the battery business such a large and growing source of demand for cobalt chemicals, particular attention should be paid to Asia-based battery manufacturers such as LG Chem, Sony, Panasonic and GS Yuasa to name a few. These are among the companies who collectively promise to determine the future trajectory of metals demand, in particular for cobalt. In short, Tesla isn't the only game in town. This was reinforced by an exceptional article on Bloomberg yesterday which focused on several smaller aspirants in the battery race. Though cobalt wasn't explicitly discussed, the article reinforced the fact that there are multiple chemistries and players in the battery space. This healthy competition can only help lower costs in what is currently a $50 billion per year industry and growing.

Much of cobalt's appeal concerns the perceived need for a reliable source and supply chain as roughly 50% of global mined production comes from the DRC and the lion's share of refined cobalt comes from China. The real opportunity in cobalt lies in the lack of a longer-term pipeline of projects that can fill any supply gap in several years time....

To read the full editorial on the InvestorIntel website please click here

 April 08, 2015
Cobalt Prices Surge 5.5% on Chambishi Shutdown News
    Publisher: MetalBulletin
    Author: Fleur Ritzema


Excerpts from the MetalBulletin Article

Cobalt prices surge 5.5% on Chambishi shutdown news

Cobalt prices surged by more than 5% on Wednesday March 8 after news of a shutdown at one of the world's biggest operations provided a shot in the arm for the previously languishing market.

High-grade prices hit $12.50-13.95 from $12.05-12.95, after sellers hiked their offer prices.

Chambishi is the world's biggest cobalt metal producer, selling large volumes of broken cathodes to Asia, the USA and Europe.

Over 1,000 tonnes of metal are expected to be affected by the temporary closure, but market sources speculate that the shutdown could continue for longer. Producers, noted a reluctance to offload ahead of potential moves higher. "We're confident that the market has changed to an upward trend. In addition, we don't have enough material to be sold in the spot market for the time being.

To read more, Sign up for a Free Trial Metal Bulletin Membership or follow on Twitter @metalbulletin

 April 02, 2015
ENRC News of Chambishi Shutdown Brings Cobalt Bulls Hope of Price Floor
    Publisher: MetalBulletin


Excerpts from the MetalBulletin Article

ENRC news of Chambishi Shutdown Brings Cobalt Bulls Hope of a Price Floor

Cobalt's losing streak may have continued this week, but an imminent shutdown at Chambishi brought talk of a floor, and potential price rises, in weeks to come.

....ENRC plans to stop production of Chambishi cobalt metal for three months, as it builds up stocks of sulphide ore, market sources told Metal Bulletin this week. Production of more than 1,000 tonnes of metal is expected to be affected by the shutdown in Zambia, and about 700 people will be put on temporary leave, sources said.

...the company is expected to be out of the spot cobalt metal market for the time being, and will look to meet its long-term demands with stored metal.

All eyes in the cobalt market were on ENRC during Metal Bulletin's mid-week pricing calls. The news of the metal production curtailment was welcomed by the bulls, who have suffered greatly this year after prices were smashed by oversupply and weak spot demand.

"I imagine the news will have some influence," one quoted trader said. "Those who had offers on the table will probably take them, and others will raise their prices. We'll be looking to raise prices."

Another trader stated, "The bears will be off to hibernate," This is the cheapest cobalt is going to be for five years." ... "In the next month, it could go to $15, and I wouldn't be surprised if $18 is tested this year and $20-25 next year," he said.

The trader pointed to strengthening demand from the battery sector, with Tesla's expansion in the electric vehicle market likely to drive up cobalt demand in the long -term.

A producer also highlighted the gap in supplies that was at stake. "Chambishi produces 10% of the world supply of metal. If that's disappearing overnight, it's going to have a big impact," he said.

To read more, Sign up for a Free Trial Metal Bulletin Membership or follow on Twitter @metalbulletin

 March 27, 2015
Investing in Cobalt Stocks - Three Stocks for the Cobalt Bull Market
    Publisher: Energy & Capital
    Author: Keith Kohl


Investing in Cobalt Stocks - Three Stocks for the Cobalt Bull Market

(Panasonic, Freeport-McMoRan and Formation Metals Inc.)

Excerpt from Energy & Capital's Editorial - March 27, 2015

Keith Kohl writes:

Regular readers of Energy and Capital know our editorial often focuses on two commodities: oil and natural gas.

And that's for good reason...

As far as investment goes, oil and natural gas are two of the biggest moneymakers in the world.

But today I want to take a different approach.

Mind you, I'm not saying oil and gas are bad investments (they're set up to see huge gains this year, actually), but I feel I wouldn't be doing you justice if I didn't mention the latest commodity I have my eye on.

The truth is, I might be the only one with eyes on it based on what I see in the financial press these days.

Anyway, if you're reading this editorial on a laptop or tablet, you use this commodity...

If you watch television, it powers your remote, and if you have smoke detectors in your house (I hope you do), it keeps them ready to warn you if there's a fire.

You probably already realize I'm talking about batteries. But there's a crucial commodity that goes in each of these types of batteries that has dipped into very valuable territory on the open market.

And while many investors and analysts, including myself, are discussing lithium --- which is also used in batteries --- I'm talking about a commodity that is just as important but that hasn't stuck in popular opinion, for whatever reason.

That commodity is none other than cobalt.

And if you haven't been paying attention to the cobalt market, you're sorely missing out on an incredible opportunity for growth and diversity in your portfolio.

Prices Look Bullish

Cobalt is predominately used in alloys because of its strength and ability to resist corrosion, so, naturally, most of the mined cobalt is used in metallurgy for things like gas turbines and jet engines.

However, cobalt has several other uses including chemical catalysts, gamma radiation, porcelain production, pigmentation for paint and glass, and, of course, batteries, which is why I like it as an investment.

Like I mentioned before, cobalt is an important component of both nickel-cadmium batteries --- which are commonly found in children's toys and smoke detectors, among many other things --- and lithium-ion batteries.

Lithium-ion batteries give cobalt its most bullish upside because they're the gold standard of rechargeable batteries throughout the world.

They're used in your phone, laptop, tablet, and --- if you happen to have one --- Tesla Model S electric car.

Most of the world's cobalt comes from the copper belt in the Democratic Republic of the Congo and Zambia, where mining is huge business.

Companies dig up cobalt all over the world, as you can see in the map above, but 55% of it comes out of the Democratic Republic of the Congo (DRC).

And political unrest in the African nation creates supply squeezes that affect cobalt prices greatly.

Since the late 1990s, various rebel groups fought civil wars against the government, and the price spike you see in the chart between 2005 and 2009 can be attributed to what's known as the Kivu conflict.

I won't bog you down with the complex geopolitical details, but it's safe to say that strife throughout the nation caused serious damage to the mining industry. The resulting supply squeeze pushed prices above $50 per pound.

As the Kivu conflict ended in 2009, though, you'll see the price begin to drop along with the global recession and stay relatively close to current levels around $12.50 per pound.

This price presents us with an opportunity to buy cobalt at what could be its lowest price for a long time.

You see, tensions are flaring once again in the DRC, as countrywide protests against president Joseph Kabila broke out earlier this year. There's no telling if these protests could lead to more civil war and violence, but if they do, it could create another serious supply squeeze for cobalt.

Of course, a potential civil war is not a reason to invest in cobalt; rather, the metal is becoming so prevalent that it only makes sense to buy now.

Ways to Play Cobalt

I mentioned earlier that Tesla uses cobalt in its lithium-ion batteries for its Model S...

As far as cobalt is concerned, the construction and planned capacity of Tesla's massive "Gigafactory" in Reno, Nevada shows a bullish future for the commodity.

Tesla uses cobalt in its batteries because it provides a much better driving range, while other companies like Nissan and Fisker use different, less effective metals.

Once the factory starts producing around 2017, it wouldn't be a surprise to see other carmakers purchase their batteries from Tesla to get in on the electric car market, which is consistently growing.

However, I wouldn't suggest an investment in Tesla at this point because the stock price is so high. Instead, I like Panasonic (OTC: PCRFY) because shares are just $13, and the company already partners with Tesla on its batteries.

Not only that, but Panasonic makes lithium-ion and nickel-cadmium batteries for other applications, too.

Of course, if you're looking for a more direct play on cobalt, I would suggest Formation Metals (TSX: FCO). Although the company only trades for about $0.15, its mines aren't in the DRC, which means it will garner a higher price for its cobalt if there is a supply squeeze due to political unrest.

But I understand if a penny stock makes you queasy, so I also suggest Freeport-McMoRan (NYSE: FCX).

The company's shares trade under $20, it pays a 6.8% dividend, and it is diversified with other metals and projects besides cobalt.

I suggest you keep your eye on the cobalt market and these three companies in particular as lithium-ion batteries take over the rechargeable electronics market.

Until next time,

Keith Kohl

Follow Keith on Twitter: @KeithKohl1

To read the full editorial on the Energy and Capital website please click here

 March 25, 2015
The Megafactories are Coming
    Publisher: Benchmark Mineral Intelligence


Benchmark Magazine launches first edition as complimentary download:

The Megafactories are Coming

Benchmark Mineral Intelligence has launched its first magazine issue which is free to download. The quarterly publication is part of an annual Membership that specialises in critical minerals and metals, disruptive technology and emerging markets.

This first issue is a battery special and includes:

• The Battery Megafactories are Coming
• Tesla Gigafactory Demand Revisited
• Battery Raw Material Review
• Exclusive interview with SQM's new CEO
• Upstream and downstream news analysis
• And more...

Excerpts from the 68 page publication:

"Tesla Motors, LG Chem, Boston Power and Foxconn are building battery super-plants that will come on-stream in the next three years. The new supply could revolutionise how we source and use energy, creating a once-in-a-century disruptive event."

"A global race is on to build the world's biggest battery plant. For what would have sounded like fantasy only a year ago, some of the world's major corporations are now vying to become the next leading producer of lithium-ion batteries."

"The battery industry is the largest market for cobalt producers, accounting for over 40% of total demand in 2014."

"At capacity Tesla's Gigafactory will require 5,000-7,000 tonnes of battery grade cobalt material. Last year, the industry produced 80,000 tonnes of refined product of which 30,000-35,000 tonnes was battery grade material. This equates to an increase in battery demand of 20% from one consumer alone."

To read the full complimentary edition please click here to subscribe

For queries and further information please contact:

 March 24, 2015
Where Will the Graphite, Lithium and Cobalt for the Battery Revolution Come From?: Simon Moores
    Publisher: Streetwise Reports - The Gold Report
    Author: Kevin Michael Grace


Following the lead of Tesla Motors, LG Chem, Foxconn and others are racing to build megafactories to build batteries for electric cars. Yet even now the world supply of graphite, lithium and cobalt needed to supply these factories is insufficient. In this interview with The Mining Report, Simon Moores, managing director of Benchmark Mineral Intelligence, explains that we can soon expect healthy prices for all three metals, but the juniors that will succeed in the market must first and foremost learn to meet the needs of the end users.

The Mining Report: You have said, "Electrification of transport will not succeed unless the world has cheap, abundant, longer-lasting batteries." What are the obstacles to obtaining such batteries?

Simon Moores: There are a number. The first is the scaling of battery supply. The megafactories will be needed to drive down costs significantly. Tesla Motors Inc. (TSLA:NASDAQ), LG Chem Ltd. (051910:KSE; LGCLF:OTCPK), Boston-Power Inc., Foxconn Technology Group and, most recently, Chinese electric vehicle producer BYD (1211:HKSE) have all announced plans to build them. Meanwhile majors like Samsung SDI have announced significant expansions of existing operations. The battery industry is preparing for a surge in demand and its next phase of growth.

But these megafactories will need assured quality raw materials, which is the second obstacle. The third is the security of supply for raw materials. This last obstacle is overlooked at the moment, as the battery industry is taking it as a given they will have supply as needed. But when megafactories come on line, demand will soar. Therefore, supply visibility all the way upstream to the mine is crucial to their success. This is what Benchmark specializes in.

TMR: How does the oil price collapse affect current and future demand for battery power?

SM: This is the question everyone's asking. Without a doubt, a halved oil price has a negative impact on those consumers who want electric vehicles (EVs) in order to save money on gasoline. To be honest, though, the success of Tesla raises the question of how many people are buying EVs for economic reasons today.

Regardless of the short-term effect, I don't think the oil price collapse will have a long-term impact. I see internal combustion engines and EVs as fundamentally different technologies. Once EVs mature, they will be far more efficient and software-driven than cars powered by internal combustion engines. I actually believe that you will get to a stage where a remote software upgrade will improve the cars' performance. You are already seeing this with Tesla. Once you reach this stage, the vehicles will actually improve over time---in essence, cars will no longer be a depreciating asset.

TMR: Would you say that Tesla has a fundamentally different target audience than Toyota Motor Corp.'s (TM:NYSE) Prius?

SM: Definitely. The Prius was created and priced for the mass market from day one. At the time "green" and "cool" did not go hand in hand, so many early Prius owners had to live with an eco-label. The car has since proven to be one of the most economical and best overall models on the road. People now have forgotten about the fact that it is a hybrid and it has been accepted in today's world.

TMR: Tesla is committed to ethical cobalt sourcing, which would rule out supply from the Congo. But the Congo, which currently supplies 55% of world cobalt, is not included in the Dodd-Frank restrictions on critical metals. So we can expect that country to continue to supply the battery industry, yes?

SM: Correct. The Dodd-Frank legislation only applies to the U.S., and it only says that public companies have to report where they source conflict minerals from, i.e., tin, tantalum, tungsten and gold. It is not a trade ban. We really think cobalt wasn't listed because it would have caused significant disruption to what is a niche but important market.

But with such a large proportion of supply coming from one country, and no major secondary options on the same scale, the majority of the battery industry has little choice but to use material sourced here, usually via the refineries based in China.

TMR: What are the alternatives to Congo for cobalt?

SM: It's important to understand that 60% of the world's cobalt-refining capacity is in China. There are environmental and supply restrictions and problems all the way along the supply chain for cobalt because it has been neglected for a generation, as have so many other critical minerals. Now the upsurge in the battery market has forced the world to confront these problems.

There aren't many cobalt companies out there. It's easier to find graphite and lithium as they are not rare minerals, so there's more of these companies listed. Cobalt, and certainly primary cobalt deposits, are much more difficult to find.

TMR: Which juniors are poised to benefit from the rush to find non-African supply?

SM: There are currently three companies based in North America: Global Cobalt Corp. (GCO:TSX.V),Fortune Minerals Ltd. (FT:TSX) and Formation Metals Inc. (FCO:TSX). All three are focusing on developing cobalt assets but out of all three major battery raw materials to date, cobalt has been the most overlooked.

But investors have an information problem. You can't get very reliable data out of the Congo, and this makes it difficult to evaluate these projects on an economic basis. That said, the fact that there are few options for new sources plays strongly into the hands of those juniors developing projects on a supply security basis for North America.

To read the full interview on the Gold Report website please click here

 March 19, 2015
Cobalt Metal Price Hits the Bottom in China
    Publisher: Asian Metal


Cobalt Metal Price Hits the bottom in China

BEIJING (Asian Metal) 19 Mar 15 - Cobalt metal prices have kept stable at RMB207-210/kg (USD15.1-15.30/lb) in recent ten days in china and most participants believe that the prices have hit the bottom with the proof of more deals in the market recently.

A source from a smelter in South China with an output of around 200tpm told Asian Metal that the smelter holds on RMB210/kg (USD15.3/lb) for its cobalt metal this week after it reduced the price form RMB213/kg (USD15.5/lb) last week. "Impacted by the sliding price in the international market, we lowered the price last week, " said the source, "but we won't reduce the price further though somebody still tries to put the price down."

Meanwhile, the smelter has received a batch of renewed orders from the fixed clients in recent days. "We don't believe the price will go down further, and the export price is also unchanged at around USD13.0/lb," added the source.

A source from a major Chinese smelter with an output of around 3,000 tons last year confirmed that the smelter maintains the prices of cobalt metal at between RMB208/kg (USD15.1/lb) and RMB213/kg (USD15.5/lb) this week, the same as that of last week. "We won't follow others to reduce the price further, at least for the coming one or two weeks," said the source.

The source even believes that the cobalt metal price has hit the bottom in China. "Cobalt ore price is steady and the supply is not sufficient." said the source. "I just don't understand why they lowered the price continuously over the past month."

To read the full article please click here to visit Asian Metal - (Guiding the World Metal Market)

 March 15, 2015
How Volkswagen Thinks It Will Undercut Tesla On Battery Cost
    Publisher: Seeking Alpha
    Author: Anton Wahlman


•Volkswagen believes it has reached parity with Tesla in terms of battery cost, and should do even better going forward.
•The company's battery modules can contain cells from any battery cell maker, including LG, Samsung and Panasonic.
•These modules can also contain either flat/square cells, or cylindrical cells just like Tesla.
•The Tesla investment case seems to rest heavily on the belief that Tesla will have a battery cost advantage going forward.
Volkswagen is investing $107 billion in developing new models over the next five years, and the company says that electrification is its #1 technology priority.

Ever since Tesla's (NASDAQ:TSLA) Model S successfully entered production in 2012, one of the central issues in the company's investment story has been whether it can sustain a battery advantage over the competition. Volkswagen (OTCQX:VLKAY) invited me to a set of meetings to hear its side of the story, as told by the overall R&D boss, Heinz-Jakob Neusser, and Audi's (OTCPK:AUDVF) R&D boss, Ulrich Hackenberg.

First of all, what do I mean by Tesla having had a battery advantage over the competition? It's not in dispute in the industry that Tesla so far has productized an electric car with the highest amount of battery capacity per unit of weight, volume and dollar.

If Tesla can maintain this battery advantage as it moves to a lower-priced car 2017-2018 and beyond, ranging from $35,000 to $60,000, such an advantage could potentially overcome the company's lack of scale in producing the rest of the car, and could therefore make Tesla into a far more relevant automaker than it is today.

In my conversations with Volkswagen's management, I was struck by how much it seems to agree with Tesla and its CEO Elon Musk about the future of the electric car. For example:

•Volkswagen believes a shift to electric cars is the biggest paradigm shift in the automobile business over the next decade .

This is interesting, because it also acknowledges that in the near term, demand remains quite low. Volkswagen has not released total plug-in electric car sales numbers, but it's not difficult to figure them out by using public records and the company's own isolated statements.

Volkswagen's production of one model alone, the eGolf, is now approximately 30,000 per year annualized. In addition to the eGolf, Volkswagen also offers the eUp and Golf GTE in some markets. Audi has the A3 eTron, and Porsche (OTCPK:POAHF) offers three models. Later this year, the VW Passat GTE and the Audi Q7 eTron enter production. Volkswagen is the middle of launching 40 plug-in electric models for the near term.

To support this massive investment program, the company is allocating a portion of its $107 billion investment budget over the next five years to various forms of electric cars. Coincidentally with the $107 billion of investments, Volkswagen operates 107 plants around the world, including 18 in China alone, where it sold 3.7 million cars in 2014.

•In terms of the battery technology debate, Volkswagen agrees with Tesla that the shape of the battery cells essentially doesn't matter. The differentiation will be in other technology choices, such as chemistry, packaging, thermal management, software and so forth.

So far, from what I can gather from shareholders, the bull view of Tesla's prospects seems to have rested on two broad assumptions about the relative battery choices:

•Tesla's choice of purchasing cylindrical battery cells from Panasonic (OTCPK:PCRFY) is somehow, in and of itself, giving Tesla an advantage in terms of yielding more capacity per unit of weight, volume and dollar - even for the long term.
•Tesla's competitors are somehow religiously opposed to cylindrical batteries, instead preferring flat/square battery cell formats.
Volkswagen denied that either of these two assumptions are true: The company agrees with Tesla that the format choice is essentially a wash, and it has been preparing to use cylindrical batteries side by side with flat/square batteries.

The other factor that Tesla's bull case rests upon is the economics of scale from Tesla's big building under construction in Nevada. In this building, it will cooperate with its anchor tenant, Panasonic, to further reduce the cost of producing batteries. How will Volkswagen meet the challenge of such a large industrial effort?

Volkswagen's strategy to undercut Tesla on battery cost is this: It has standardized on a module size - think, a shoe box - into which battery vendors such as Panasonic, LG (OTC:LGEAF) and Samsung (OTC:SSNLF) can fit either flat/square battery cells or cylindrical ones such as the ones Tesla has been using.

This interchangeability, therefore, gives Volkswagen the ability to simply play out the battery vendors against each other without having to redesign the car's hardware. On any given day, Samsung, LG and Panasonic will be willing to sell any of two standardized battery sizes (cylindrical and flat/square) for a different price. At this point, Volkswagen can effectively conduct a "reverse auction" among the suppliers, in order to secure the lowest price.

This kind of commoditization - not unlikely that we have a very liquid spot price for oil that's traded - would be impossible if the parts weren't interchangeable. Of course, you can always redesign the car based on a new battery, but that takes years and costs huge amounts of money.

Rather, Volkswagen will undercut Tesla on battery cost because it does not put everything on one card, by investing billions of dollars into its own factory whose product has to remain the most technologically competitive, as well as operate at the highest level of capacity utilization in order to be competitive. Volkswagen figures it can consistently pay a lower price per kWh by constantly playing all the battery vendors against each other: Let THEM (the battery cell vendors) make the investment in capex, while WE (Volkswagen) always get the lowest price, thanks to competition.

This is no different than Volkswagen avoiding making its own tires. It would simply not make any sense to vertically integrate this technology.

In addition to undercutting Tesla on battery CELL cost, Volkswagen will also have it own production of the entire battery PACK. Volkswagen believes it has a reasonable chance to be competitive with the cell vendors, once you go to the pack level. It has its internal battery pack factory that competes with the external cell suppliers, such as LG, Samsung and Panasonic. To see how flexible Volkswagen's production is, let's look at three current examples: •eGolf and eUp: Panasonic cells, but Volkswagen makes the battery pack. •Golf GTE: Panasonic makes both the cells and the entire pack. •Passat GTE: Samsung cells, but Volkswagen makes the battery pack.

In a separate interview, Audi CTO Hackenberg dropped a bomb by confirming how flexible this Volkswagen battery strategy is. He said that the all-new Audi R8 eTron, which Audi expects to have a range of 280 miles, has a battery pack that consists of 52 modules containing a total of 7,488 cells. In other words, 144 cells per module.

7,488 cells in total. You know what that means, folks. It means that Audi is using the same cylindrical cells as Tesla, even though the vendor in this instance is Samsung, not Panasonic.

It's no wonder that the overall battery statistics of this car, the R8, are therefore similar to Tesla. The capacity of the battery pack is similar, the kind of cells used is similar, the weight per kWh is similar, and the range is similar.

The difference is that while Audi uses this Samsung cell today, it is not wedded to what it would be producing in its own battery cell factory, had it been in Tesla's shoes. Audi can switch to LG and Panasonic, and switch from cylindrical to flat/square battery cells, if the battery cell price fluctuates in its favor. It's harder to do that if you own your own factory for which you have paid billions and have to run at close to full capacity utilization in order to be competitive on cost.

Finally, Volkswagen emphasized that the industrial economics of producing all flavors of a car - gasoline, diesel, hybrid, plug-in hybrid and fully electric - totally integrated on the same assembly line are huge. With demand for electric car being both small, uncertain and highly fluctuating in the near term, allocating a specific car and production line to a low-volume electric car is simply a recipe for losing your shirt.

Volkswagen is engineering almost all of its cars to be made with all of these powertrain combinations going forward. There will be a plug-in hybrid and fully electric version of almost every single nameplate under the VW umbrella. Volkswagen already offers more plug-in electric models than any other automaker, and it should soon be at 40 different plug-in electric models.

The one area where Volkswagen does not want to take as a direct and active role in the electric car food chain is the charging network. While it dabbles in small initiatives here and there, it basically wants to stay out of it. It wants other entities, such as gasoline stations, parking garages or other independent service providers, to deal with electric car infrastructure.

The rationale for this is that it does not want to saddle the buyer of a plug-in electric car - who basically is charging only at home and/or at the office - with the cost of building out the infrastructure. It would add to the price of the car, and Volkswagen aims to be the low-cost leader.

While I agree that in the long run, car companies ought not be involved in charging infrastructure build-out, I disagree about the short term. To ensure the best possible customer experience in these nascent electric car days, I think it would be wise for the automaker to take a very active and direct role in funding this civil engineering project. It does not need to last for too many years. After a few years, it can be sold to an independent party - sort of like what happened to Orbitz in the airline industry. But it needs the automaker's far more robust push in these early days.


Volkswagen believes it has eliminated Tesla's battery advantage, and this will play itself out as the new models roll out in the coming years, starting with the Audi R8 eTron in 2015 and the upgraded VW eGolf shortly. By 2018, this strategy will be in full bloom. By making battery modules with interchangeable cells, Volkswagen can play Panasonic, LG, Samsung and others against each other, ensuring the lowest cost at all times. Then, producing the fully electric and plug-in hybrid cars on the existing assembly lines assures the lowest cost for these cars overall.

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Seeking Alpha Disclosure: Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks. Additional disclosure:
At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. Volkswagen paid for airfare, lodging and meals to enable this first-hand report. The author regularly test-drives cars provided by many of the major automakers, including Volkswagen.
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