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Goldman Sees Tesla Consuming Up to 17% of Lithium Output

Tesla Motor Inc.’s planned battery factory may consume as much as 17 percent of current lithium output, easing a forecast oversupply and benefiting producers like Rockwood Holdings Inc., Goldman Sachs Group Inc. said.

The battery plant that Tesla co-founder Elon Musk has called a “gigafactory” could require the equivalent of 15,000 tons to 25,000 tons of lithium carbonate annually at full capacity, Goldman analysts led by Robert Koort said in a report today. That estimate exceeds a Feb. 26 Bank of America Corp. prediction the facility would use 9,000 tons.

Tesla today sold $2 billion of convertible notes to fund the factory intended to lower the cost of lithium-ion batteries used in its vehicles and for power storage. The increasing popularity of Tesla’s electric cars, which use larger battery packs than competing models, should help narrow the coming lithium oversupply, Koort wrote.

“We continue to see a near-term oversupply scenario as likely,” Koort, who rates Rockwood neutral, said in the note. “An inflection in pure battery electric vehicles may help ease oversupply of lithium around 2020.”

Galaxy Resources Ltd.’s decision not to resume production in Mt. Cattlin, Australia, also contributes to the tighter supply outlook, he said.

While companies like FMC Corp. don’t get a big portion of earnings from lithium, Rockwood is “positioning for an electric vehicle inflection,” Koort said.

Rockwood is divesting units to focus on lithium products and surface treatments. The Princeton, New Jersey-based chemical maker gained more access to lithium supplies with its December agreement to form a joint venture with China’s Chengdu Tianqi Industry Group Co. to get a stake in Talison Lithium Pty.

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