Battery Metals

EU lawmakers have agreed on a new set of rules aiming to make batteries in the bloc more sustainable and reusable.

The regulations will cover the entire battery life cycle: from the extraction of materials and industrial production, to disposal. They will apply to all types of batteries sold in the EU, including portable batteries used in electronic devices, industrial batteries, SLI batteries used in automotive applications, as well as batteries used in two-wheelers and EVs.

The green requirements of the newly-agreed rules set an impressive milestone for the Union as part of its goals to advance its energy transition and increase its competitiveness in the sector.

They might, however, present a series of challenges to manufacturers — especially in the consumer electronics and automotive industries.

Under the new rules, all companies selling batteries in the EU market must implement a “due diligence policy,” addressing the social and environmental risks linked to the sourcing, processing, and trading of raw materials.

They will also need to use a set percentage of recycled materials: 16% cobalt, 85% lead, 6% lithium, and 6% nickel.

In addition, the EU has set ambitious collection targets to secure a steady stream of recycled materials. In the case of electronic devices the targets are set at 45% by 2023 and 73% by 2030; in the case of EVs, at 100%.

These developments might prove especially challenging for global automotive manufacturers and battery producers, as they would need to start preparing for the new requirements by carefully reviewing their supply chains, reviewing their supply chains, reevaluating their operations, and moving into strategic partnerships with recyclers.

Portable batteries in electronic devices, meanwhile, must be designed to allow consumers to easily remove and replace them.

This threatens the current practices of major consumer electronics brands, such as Apple and Samsung.

The vast majority of smartphones and laptops currently on the market come with non-removable batteries — the argument being that this design enables the development of slimmer and more durable products.

In cases of battery failure, consumers are directed to dedicated service stores where the repair or replacement is performed by a technician.

The new battery rules along with the EU’s “right to repair” legislation would not only mean less manufacturer profits from servicing, but also the prospect that brands will have to rethink their products’ overall design.

The battery regulation is pending final approval by the Parliament and the Council, and if it passes, it will set a high green standard for the global battery market in the years to come.

Ford Motor Co. and China’s Contemporary Amperex Technology Co. Ltd. are considering building a battery manufacturing plant in Michigan in a complex arrangement designed to reap new tax benefits without running afoul of US-China political sensitivities.

The state has emerged along with Virginia as a potential home of the multibillion-dollar facility, according to people familiar with the matter, who asked not to be identified discussing sensitive negotiations. The factory will provide lithium iron phosphate batteries for Ford’s electric models.

The companies are weighing a novel ownership structure under which Ford would own 100% of the plant, including the building and the infrastructure, while CATL would operate the factory and own the technology to build the cells, the people said. Such an arrangement would let the facility qualify for lucrative production tax credits under the new Inflation Reduction Act while requiring no direct financial investment from CATL.

The Chinese government has discouraged CATL from investing in the US due to tensions with Beijing’s top geopolitical rival, according to the people. The battery maker paused plans this summer to establish a new facility in North America after House Speaker Nancy Pelosi’s trip to Taiwan further strained relations between the superpowers, Bloomberg reported in August.

The proposal is just one option that has emerged since the IRA was signed into law in August, and it’s still far from being a done deal, the people said. The lack of clarity around specific content requirements in the IRA is also impacting the decision, and sites in Mexico and Canada haven’t been ruled out.

Shares in CATL jumped 5.3% Thursday, the biggest gain in two months. Ford shares fell 2.2% to $13.18 as of 9:43 a.m. in New York.

The Treasury Department is scheduled to issue guidance finalizing the content requirements and tax credits of the IRA by the end of this month.

‘Still deliberating’

“CATL is still deliberating on investing in the US and we have not made the decision yet,” the battery maker said in an emailed statement. “There are multiple models being discussed regarding our investment in the US, and all of those choices are purely based on and only based on business concerns.”

The company, which already has a deal to sell batteries to Ford for use in its flagship F-150 Lightning and Mustang Mach-E vehicles, said it’s “not true” that the Chinese government objects to CATL investing in the US.

China’s Foreign Ministry said in a statement Thursday it was unaware of the situation. The Chinese Embassy in Washington had no immediate response to a request for comment.

Ford said in a statement that “our talks with CATL continue — and we have nothing new to announce.”

If the Dearborn, Michigan-based carmaker opts for Virginia or elsewhere, it would mark another high-profile snub of its home state. Ford opted to build battery hubs in Tennessee and Kentucky in its initial $11 billion investment with South Korea’s SK Innovation Co.

Securing enough batteries to build millions of plug-in models has become a key competitive battleground in the emerging EV market. In addition to Ford’s joint venture with SK, General Motors Co. has established a partnership with South Korea’s LG Energy Solution Ltd. to build battery plants in the US.

“It is incredibly important to own the battery value chain, there’s no doubt,” Lisa Drake, Ford’s vice president of EV industrialization, said in an interview Tuesday on the sidelines of a Ford technology event. That “is why we are controlling the raw materials ourselves, nickel, lithium, etc.”

She declined to comment on the specifics of negotiations with CATL.

Cost competitive

CATL, the world’s biggest maker of batteries for electric vehicles, has been considering locations in Mexico and the US to supply cells to automakers including Ford and Tesla Inc., Bloomberg reported earlier this year. But the production tax credit in the IRA, worth as much as $35 per kilowatt hour for each cell produced, could make manufacturing batteries in the US cheaper than in Mexico, according to the people familiar with the matter. The subsidies also offset US tariffs on raw materials imported from China.

Ford announced its partnership with CATL in July, saying it had secured 70% of the battery capacity needed to build more than 2 million EVs annually starting in 2026, a goal set by Chief Executive Officer Jim Farley.

On Ford’s third-quarter earnings call in October, Farley was asked about the status of the CATL partnership given tensions between the US and China. Farley said Ford could “economically” import lithium iron phosphate, or LFP, batteries from China, but alluded to other options to localize production.

“The real billion-dollar question is, when do you localize production of LFP in North America?,” he said on the call. “Whose name is on the front of the building?”

General Motors Inc. is signaling it will reach further down the value chain to ensure it has the minerals it needs to become a major player in electric vehicles.

“We absolutely are convinced we need to have control of our own destiny when it comes to EV critical minerals,” Tanya Skilton, GM’s director of electric vehicle critical materials, said on an industry panel in Washington. “At times we have engaged, for example, with the steel industry, with steel mills in our history, but to go all the way down to mine sites is new and unique for us at this stage.”

Competition for the minerals needed for the energy transition, such as copper, lithium and cobalt, is becoming more fierce as supplies fall short of demand. It is forcing some automakers to change the way they source raw materials, going all the way down the value chain to procure metals directly from mines, a move that manufacturers historically avoided.

The auto industry traditionally left raw materials that come out of the ground to processors and equipment manufacturers.

Indonesia has filed an appeal against the World Trade Organization to assert its right to ban exports of metal ores.

The appeal was sent to WTO members on Monday, according to a notice on the organization’s website. WTO had earlier ruled in favor of the European Union’s complaint that Indonesia’s ban on nickel ore exports was hurting its steel industries.

The dispute started in 2021 when the EU asked for the establishment of a panel, saying that the Southeast Asian country’s requirement for minerals to be processed locally and its failure to promptly publish the policy are inconsistent with WTO rules.

A panel of WTO experts last month urged the country, which is the world’s largest nickel ore producer, to bring its measures in line with WTO obligations. The ruling could jeopardize Indonesia’s bid to push the resource-rich nation up the commodities value chain and develop local metal refineries.

The US Department of Energy announced a big boost to domestic electric vehicle battery production on Monday. It’s loaning $2.5 billion to a company called Ultium Cells, a joint venture between General Motors and LG Energy Solution that will build batteries for the automaker’s new range of EVs. The funds will help with the construction of three new battery plants in the US—in Lansing, Michigan; Lordstown, Ohio; and Spring Hill, Tennessee—as part of GM’s plan to build 1 million EVs a year by 2025.

US battery production is set for massive growth in the coming years. First, the pandemic disrupted shipping, exposing the fragility of global just-in-time supply lines. Then, the Inflation Reduction Act of 2022 tied an EV’s potential tax credit to the domestic content of that EV’s battery pack, in terms of raw materials and final assembly. Each year, an escalating proportion of the battery must be domestic in order to qualify for the credits of up to $7,500.

However, it’s unlikely that the automakers or their battery suppliers were taken by surprise. Linking EV incentives to local manufacturing was proposed in 2021 by a group of lawmakers in a more ambitious infrastructure bill that would have added an extra credit for vehicles made by unionized workers. (That bill did not survive contact with Senator Joe Manchin.)

Consequently, we have seen a flurry of new battery factory announcements of late. In September 2021, Ford said it and SK Innovation would create 11,000 new jobs at three BlueOvalSK battery factories in Kentucky and Tennessee. A month later, Toyota said it would spend $3.4 billion on US battery production. That same day, Stellantis revealed it had created a joint venture with LG to open a 40 GWh/year battery plant in the US by 2024.

This July, we learned Volkswagen was looking for US sites for closed-loop battery factories, each with an annual output of 40 GWh. In October, BMW announced a $700 million investment in a battery assembly plant in South Carolina, near where it builds most of its SUVs. And Honda and LG inked a joint venture to build another 40 GWh/year facility in Ohio, home to several of that automaker’s manufacturing sites already.

As for GM, it has begun a massive electrification effort, underpinned by a new standard battery platform across its brands. The batteries, called Ultium cells, are pouch cells that use nickel-cobalt-manganese-aluminum chemistry and can already be found in new EVs like the BrightDrop Zero 600 delivery van, the Hummer EV, and Cadillac’s Lyriq SUV. But GM has many more EVs arriving in the near future, including an electric Silverado truck and a $30,000 Equinox EV, plus a range of cheaper EVs made in partnership with Honda due for 2027.

The loan was granted under DOE’s Advanced Vehicle Technology Manufacturing program. Dating back to 2008, the ATVM program was vital to Tesla’s early success, but other EV makers funded around that time did not fare so well, and the loan program barely survived the Trump government. But now, under US President Joe Biden, supporting green manufacturing is once again a national priority.

“DOE is flooring the accelerator to build the electric vehicle supply chain here at home—and that starts with domestic battery manufacturing led by American workers and the unions that support them,” said US Secretary of Energy Jennifer Granholm. “This loan will jumpstart the domestic battery cell production needed to reduce our reliance on other countries to meet increased demand and support President Biden’s goals of widespread EV adoption and cutting carbon pollution produced by gas-powered vehicles.”

A recent report produced by PwC Australia and commissioned by Australia’s national science agency CSIRO found that the country has the potential to become a global superpower in solar PV energy generation and export, but it must first develop its own fully integrated domestic solar supply chains to do so.

Dubbed the “Australian Silicon Action Plan,” the document sets out the actions Australia needs to take to participate in a fully-fledged supply chain for silicon and solar cells – a critical step towards energy security and independence.

According to the dossier, the Australian Government has identified silicon as a critical mineral, given its current supply chain risks and its importance to new economy technologies such as solar cells, semiconductors or chips, optical fibres, aluminum alloys, and some types of energy storage devices.

Silicon is abundant in Australia in the form of quartz, but the process of smelting quartz to silicon, then to high-purity silicon has not been sufficiently developed.

“Australia already has the highest per capita deployment of rooftop solar in the world, and there are several mega-projects in the solar development pipeline,” Chris Vernon, CSIRO senior principal research scientist, said. “But one of the greatest risks to Australia’s solar ambitions and energy future is our reliance on overseas supply chains for solar cell technology.”

The report notes that increasing the in-country production of silicon is the first step for Australia to develop its own capability and capacity in the solar cell supply chain.

“Demand for solar power and current supply chain dynamics means Australia must grasp the opportunity now,” the document states. “Between 2021 and 2050, solar PV’s contribution to the energy mix in Australia is expected to increase from 12% to approximately 50%, while according to the International Renewable Energy Agency, estimated annual global solar power generation capacity must increase more than five-fold by 2030, and 14-fold by 2050 to stay on track for net-zero targets.”

The PwC analysis says that to keep pace with these solar capacity forecasts, annual global production of silicon and its purified form – polysilicon – will have to materially increase.

At present, around 70% of silicon is produced in China, while China also dominates the production of polysilicon. The conversion of polysilicon to solar cells is even more concentrated, with China accounting for between 75% and 97% of these stages of production.

From quartz mining to recycling

The Australian Silicon Action Plan suggests that it is possible for Australia to grow its share in the silicon market by developing a fully integrated silicon and solar cell supply chain, from quartz mining through to manufacturing, end-of-life processes, and recycling to support and de-risk the overall solar supply chain. To this end, the plan proposes three horizons:

• Horizon one – actions that can commence immediately as first steps for developing an integrated silicon and solar cell supply chain. These include identifying potential locations for new smelting facilities, integrating renewable power into smelting processes, and research funding into next-generation processes and technologies.
• Horizon two – actions focused on expanding Australia’s supply chain activity, such as developing more complex supply chain steps for manufacturing components for solar cells.
• Horizon three – actions that will lead to an integrated, low-carbon and circular solar cell supply chain in Australia, such as supporting polysilicon production and focusing R&D efforts on developing and scaling emerging and future technologies.

“Australia has enormous potential when it comes to supplying solar power for its own and also the region’s energy needs, but our current reliance on concentrated silicon and solar cell supply chains poses risks to Australia’s energy independence,” Vernon said. “The Australian Silicon Action Plan suggests a pathway for the creation of an industry that has the potential to provide employment and reskilling opportunities, the delivery of significant economic benefits that come from adding value to Australia’s mineral endowment, development of new industries in regional Australia with the world’s best ESG standards, all while improving Australia’s energy security and independence.”