A battery supply chain that excludes China seems impossible
“I doHe likes it get all the gas emissions off the world’s highways,” said John Goodenough, one of the Nobel Prize-winning scientists who developed the lithium-ion battery four decades ago, in an interview in 2018. Goodenough died on June 25 before his dream could become reality. But governments around the world are scrambling to make it so, with surprising results. Sales of electric cars worldwide between 2019 and 2022, surpassing 10m units last year.
But the pace of transformation is running into supply constraints and geopolitical headwinds. The supply of minerals needed to make lithium-ion batteries will need to grow by a third every year this decade to meet estimated global demand. America alone will need tens of millions of batteries to meet its goal of ensuring that half of America’s vehicle sales will be electric vehicles by 2030. And yet it is Big competitor, China, the largest processor of battery metals, battery producer. cells and finished batteries manufacturer.
Even where production is done overseas, Chinese companies control the process. American policymakers see that as a threat to the stability of American supply chains. All this makes Goodenough technology one of the most important industrial battlefields of the new cold war.
The product will be tested in Asia, where most battery supply chains are based. The first bottlenecks are in the production and processing of materials – including two of the most important battery materials, lithium and nickel. Capturing a steady supply of both will be critical for producers worldwide. Almost half of the lithium produced in 2022 came from Australia, 30% from Chile and 15% from China. In terms of nickel, Indonesia’s output ran to 48% of the global total last year, with the Philippines accounting for another 10% and Australia 5%.
To date, America pursues narrow trade agreements with some of these countries to gain access to minerals and production capacity, and offers large subsidies to producers through its Inflation Reduction Act. To benefit from $7,500 American credits for new ones EVs, producers must meet strict requirements on the proportion of processed minerals and batteries made in America, or in a country, other than China, with which America has a free trade agreement. China is building a parallel battery supply chain at the same time.
Indonesia’s dominance in nickel is itself a potential bottleneck. Evaluation by PWCconsultant, last year suggesting that 2.7m tonnes of the material will be needed each year for EVs by 2035. Indonesia currently produces only 1.6m tonnes, most of which is used for stainless steel. A lot of capacity is planned, or under construction, to mine and process the metal. The processing is probably the most difficult part of the supply chain to make it free from China. By one estimate, China smelts and processes about three quarters of the world’s nickel. About two-thirds of its capacity is also for lithium processing. Even these numbers underestimate Chinese growth, as much of the processing is done outside of China involving Chinese companies.
The three Indonesian operations use high-pressure acid leaching, an advanced process that extracts nickel from its ore without melting it. All are based on Chinese technology, operational capability, or both. In order to obtain nickel supplies, Ford, an American automaker, formed a venture with a Chinese mining company, Huayou Cobalt, to invest in a nickel processing plant in Indonesia. The Chinese company welcomed the partnership for its contribution to its country’s Belt and Road Initiative, a sentiment unlikely to be popular in Washington. Ford is already facing political heat at home over a different venture with a company in China: a new plant in Michigan, manufacturing both nickel-based and lithium-based batteries, for which it has joined to Chinese battery giant Contemporary Amperex Technology Co. . Ltd (CATL). The Chinese company makes more than a third of the world’s electric vehicle batteries, measured by their total capacity.
The large presence of Chinese companies is not just due to their extraordinary business expertise. It also shows the ability to move quickly and take risks, according to mining executives and experts. The small number of Western companies working in nickel mining and processing spend more time doing preparatory studies and working. Sumitomo Metal Mining, a Japanese mining company, pulled out of a nickel processing project last year, citing disagreements with its partner, PT Vale Indonesia, another utility company. The feasibility study on the project has been ongoing since 2012.
Chinese companies also dominate the production of battery parts. Among the parts for battery cells, China accounts for at least half of production and more than 70% in some regions. The rest of the business is based in South Korea and Japan. Between them, the three countries in East Asia account for between 92% and 100% of the midstream parts of the industry. Even if America is able to obtain enough processed minerals, to achieve its ambitious goals will require a great deal of Korean and Japanese battery manufacturing expertise into North America.
LG Energy Solution, based in South Korea, is the second largest battery manufacturer after that CATL. The company is expanding in America, with joint ventures underway with Hyundai, Honda and General Motors. LG aims to produce 278-gigawatt-hours of storage capacity in North America by 2030, up from just 13Mrsh in 2022. That may be too optimistic. Kim Myung Hwan, the company’s chief procurement officer, notes that rising construction costs, a shortage of skilled workers and the volatility of the price of materials needed for batteries are all obstacles. your growth is fast.
Some Asian manufacturers worry that the cost of overseas production could be too high for years. “It’s much more important to think about how to make the business profitable for ten, 15, 20 years,” said Hideo Ouchi, director of W-Scope, a Japanese company that manufactures separators used in battery cells. . Mr. Ouchi estimates that to meet his goals for electric vehicles by 2030, America alone will need as much battery separator material as was produced globally in 2021 .
Government policy represents another uncertainty – especially as many Asian battery manufacturers are counting on decades of financial support. Last month, the United Auto Workers of America criticized the Biden administration for failing to put strict labor rights conditions on a loan of up to $9.2bn to Ford and SK FOR, a Korean battery maker, for a new plant in Michigan. Future Republican administrations could reduce the flow or simply scrap it EV targets.
This means a fluid picture. Expanding the battery supply chain to match the massive global demand for electric vehicles represents one of the biggest business challenges ever attempted. Even the current order of bottlenecks in the industry will make it difficult. Pulling it off – for the sake of the climate, human health and many others – without the country most of the measures controlling the battery industry could be impossible.■