(The opinions expressed here are those of the author, acolumnist for Reuters.)
By Andy Home
LONDON, Sept 20 (Reuters) - The lithium rush is on.
Not a day goes by without an exploration company telling usabout an exciting development on their property, which is now alithium prospect irrespective of what minerals were originallybeing hunted.
Today it is the turn of Premier African Minerals, providing"a positive update on its 2,500-meter drilling programme at thecompany's Zulu Lithium Project near Fort Rixon in Zimbabwe".
Tomorrow it will be someone else.
Everyone, it seems, is trying to jump on the lithiumbandwagon, fuelled by Tesla and other electric auto pioneers andpropelled by rapidly rising prices and the promise of more tocome.
It is a boom. Whether it turns to a bust is a hotlydiscussed topic across social media and internet forums.
Sceptics point to past excessive exuberance in metallicbubbles such as rare earths as a warning of what may lie instore.
And there is an obvious analogy. While no-one doubtslithium's demand prospects, the big unknown is how much supplywill be there to meet it. Too little or, as turned out to be thecase with rare earths, too much?
Key to answering that question will be the behaviour of thebig four producers that currently dominate the lithium supplylandscape.
Some of them are now starting to make their moves, first andforemost by extending and tightening their grip on the lithiumsupply chain.
CONSOLIDATION AND CONTROL IN AUSTRALIA
Greenbushes in Western Australia is the world's largesthard-rock lithium resource and it was at the heart of the lastmajor consolidation wave among the lithium establishment.
Its joint owners are Tianqi Lithium andAlbemarle. The former snapped up the previous ownerTalison Lithium in 2013 and then sold a 49 percent stake toRockwood Holdings, which was itself subsumed into Albemarle in2014.
Now both partners seem intent on extending their footprintalong the downstream supply chain.
Tianqi has just announced its intention to build a A$400million ($306 million) plant, also in Western Australia, toconvert the mine's output into high-grade lithium hydroxide, theform of the metal needed for automotive and energy storagebatteries.
Albemarle, which had been toll-refining its share ofGreenbushes' output at Jiangxi Jiangli facilities in China hassigned a definitive agreement to buy out the Chinese company.
The transaction, expected to close in the first quarter of2017, will "accelerate our strategic goal of capturing 50percent of the growth in the lithium industry".
CONFUSION IN CHILE
Tianqi's ambitions extend beyond controlling its ownAustralian supply chain.
It has thrown its hat into the ring for the 23 percent stakeup for sale in SQM, another member of the lithiumestablishment with brine and conversion operations in Chile.
It's a bold move. There is both "complexity and uncertaintyaround the transaction", as another Chinese bidder, NingboShanshan, noted with considerable understatement in explainingwhy it withdrew from the running.
A history of political scandal, a long-running stand-offwith CORFO, the Chilean development agency that controls therights to the brine deposits in the Atacama desert, and a government investigation make for a highly inflammatorycocktail.
Tianqi's bid for the SQM stake, however, is a very clearstatement of intent to rise up the four-strong hierarchy ofestablished producers.
The fourth member of the establishment is FMC. Italone has stayed out of the recent investment fray, choosing,for now at least, to go down the organic growth route.
FLEXING CAPACITY
This flurry of activity reflects both an internalestablishment battle for market position and the build-out ofdefences against the hordes of new and would-be producers tryingto grab a slice of the lithium action.
Implicit in the latter ambition is the ability of the bigfour to increase production and retain market share.
Both Tianqi's new Australian plant and Albemarle's swoop onJiangxi Jiangli are predicated on an expansion of activities atthe Greenbushes mine.
Talison doesn't currently disclose either capacity orproduction levels at Greenbushes but it's studying an expansionwhich would double both, Chief Financial Officer Lorry Mignaccatold Reuters.
Engineering studies on the expansion are due to be completedby the end of this year or early 2017 with any expansion timedto complement Tianqi's proposed start-up in 2019.
There is similar flex within Chile, albeit one that iscurrently constrained by the dark political web surrounding SQM.
For its part FMC seems confident it can triple its hydroxidecapacity by redirecting existing lithium resource towardsbattery-use products.
It's a stance that has raised a few eyebrows among thelithium cognoscenti but FMC claims "our manufacturing network ishighly flexible, which allows us to increase capacity oraccelerate expansion plans as customer needs warrant".
NEWCOMERS
Meanwhile, the first wave of challengers to the big four isarriving.
Orocobre is currently ramping up production at itsSalar de Olarez brine operations in Argentina.
Extracting lithium with the right purity and, equallyimportantly, with the required tight levels of impurity is atricky business and Orocobre has experienced its share ofteething problems since first production began last year.
But the company is guiding towards production of 15,000tonnes of lithium carbonate in the financial year to June 2017,up from 6,900 tonnes in the first year of operations.
And more, many more are coming behind Orocobre.
What price lithium will command by the time they arrive isthe big unknown.
Can the establishment lift production enough to deter theincomers? Or will it collectively fail to meet lithium'sexpected super strong demand growth with all the bull marketimplications such a shortfall would entail?
What we're seeing now are just the opening strategic movesin a battle that will be waged for many years to come.
(Editing by Susan Thomas)