In a report published Friday (via Bloomberg), Goldman Sachs (GS) analyst Robert Koort said Tesla (TSLA)’s gigafactory may use up to 17% of current lithium output, easing a forecast oversupply and benefiting producers like Rockwood Holdings Inc. (ROC).
The battery plant, a plant so big that Tesla chief executive Elon Musk has called it the ‘gigafactory‘, could require “the equivalent of 15,000 tons to 25,000 tons of lithium carbonate annually at full capacity,” Koort said in the report. That estimate surpasses a February 26 BofA (BAC) projection the plant would use 9,000 tons.
The electric car-make filed a release during the week to issue $1.6 billion worth of convertible notes to fund the factory intended to lower the cost of lithium-ion batteries used in its Model S and X vehicles by making them from raw materials instead of components. “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. An inflection in pure battery electric vehicles may help ease oversupply of lithium around 2020.”
While companies like FMC Corp. (FMC) don’t get a big portion of earnings from lithium, Rockwood is “positioning for an electric vehicle inflection,” Koort, who rates Rockwood neutral, said.
Tesla shares were down 1.48 percent at $248.95 in midday trading. Tesla Motors, whose market cap has swelled to $30.54 billion, has seen its stock advance more than 7-fold in the past year, and 15-fold since its June 2010 IPO.