Battery Metals

Ford Motor Co., General Motors Co., and Stellantis NV are in talks with South Korea’s Posco Chemical Co. about potentially investing in plants producing electric-vehicle battery materials in North America, according to people familiar with the matter.

The factories would make cathode-active or anode materials — key ingredients for determining the energy density of lithium-ion batteries used in cars — said the people, asking not to be identified because the discussions are private. The talks are preliminary and may not necessarily lead to a deal, according to the people. Posco Chemical is also talking to other automakers about similar investments, they added.

A spokesperson for Posco Chemical declined to comment, while representatives for Ford, Stellantis, and GM all declined to comment.

Posco Chemical’s Chief Executive Officer Min Kyung-zoon told reporters on Nov. 1 that the Korean company is in talks with three carmakers to build battery-materials plants in the US, without naming them. It already has a relationship with GM, in July signing a $10.8 billion deal to supply battery materials, bringing the total value of its contracts with the US carmaker to almost $17 billion.

GM is investing $35 billion to make its lineup fully electric by 2035, while Ford is plowing $50 billion into its pivot to EVs, with plans to build 2 million a year by 2026. Stellantis, the maker of Ram pickups and Jeep off-roaders, is targeting 75 fully-electric models by 2030 with annual sales of 5 million vehicles.

This rapid shift to EVs is making sourcing batteries — and the metals used in them — a key competitive battleground for automakers. In recent months the likes of Honda Motor Co., Ford and Stellantis have teamed with Korean battery makers LG Energy Solution Ltd., SK Innovation Co. and Samsung SDI Co. to invest billions in North American battery plants.

The race has only intensified as the US government pressures automakers to slash their reliance on Chinese batteries and materials — a major constraint given that China is home to the world’s two biggest EV battery makers and is a key source of battery metals such as lithium, cobalt and graphite.

Korean auto and battery makers have lobbied against the US moves, included in the Biden administration’s Inflation Reduction Act. Teaming with US automakers on battery plants could help Posco Chemical comply with the changes, because it will be supplying the materials directly, not producing them in countries that don’t have a free trade agreement with the US.

Posco Chemical this week completed the expansion of its cathode-active materials plant in the Korean city of Gwangyang. The plant has an annual capacity of 90,000 tons, making it the biggest in the world with the ability to supply materials for 1 million EVs a year, the company said.

“Most orders for deliveries by 2026 have already been booked,” Chung Daehun, the head of the firm’s energy material business unit, said in an interview. “We are also looking for a site for a new plant in Europe, which can offer cheap electricity for us.”

The company is seeking to increase production of cathode-active materials to 610,000 tons by 2030 to hold around 20% of the global market.

Citing climate change, France on Thursday called for an international ban on deep sea mining, upending negotiations by a UN-affiliated organization to allow the exploitation of unique ocean ecosystems for valuable metals to begin within two years.

“As the effects of climate change become increasingly threatening and the erosion of biodiversity continues to accelerate, today it does not seem reasonable to hastily launch a new project, that of deep seabed mining, the environmental impacts of which are not yet known and may be significant for such ancient ecosystems which have a very delicate equilibrium,” French Ambassador Olivier Guyonvarch told the International Seabed Authority at a meeting of its policymaking Council in Kingston, Jamaica.

The United Nations Convention on the Law of the Sea treaty established the ISA in 1994 to regulate mining in international waters while at the same time ensuring the protection of the marine environment. After years of negotiations to develop mining regulations, ISA member nation Nauru in 2021 triggered a provision in the treaty that requires the Council to approve those regulations within two years.

Otherwise, the Council may be compelled to provisionally approve an application for mining by The Metals Company, a Canadian-registered seabed mining venture sponsored by Nauru, a tiny Pacific island nation. Nauru, like other ISA member states that sponsor mining contractors, would receive royalties from any seabed mining.

Over the past two weeks, a growing number of member states of the ISA, which includes 167 countries and the European Union, have called for a “precautionary pause” or moratorium on mining due to the lack of scientific data on fragile and biodiverse deep ocean ecosystems targeted for exploitation. Among the countries demanding a pause are Germany, France, Spain, Costa Rica, New Zealand, Chile, Panama, Palau, Fiji and the Federated States of Micronesia.

Meanwhile, Brazil, the Netherlands, Portugal, Singapore, Switzerland and other Council members have indicated they would not approve any mining contracts until sufficient environmental protections for the seabed are in place, regardless of a July 2023 deadline to adopt regulations.

Then on Monday at the COP27 climate summit in Egypt, French President Emmanuel Macron advocated a complete ban on deep sea mining. Guyonvarch, the head of France’s delegation to the ISA, formally proposed such a ban at Thursday’s Council meeting, saying the world had changed since the ratification of the Law of the Sea Treaty.

At the time, the deep sea was widely considered a muddy, lifeless abyss, albeit one rich in cobalt, nickel and other metals potentially worth trillions of dollars. Scientists now believe the seabed set to be mined is among the most biodiverse places on the planet, with a role in the global climate that remains little understood.

“When the ISA was created…almost 30 years ago now, the challenges that we face today, the urgency of climate action and the collapse of biodiversity and its ecosystem services, were not the same,” said Guyonvarch.

France’s call for a ban drew rebukes from other ISA members. The Cook Islands, which sponsors a mining company, asked whether France would relinquish its seat on the 36-member Council and give up the two mining contracts it sponsors. “We hope France will reconsider its position,” Cook Islands’ delegate said.

Representatives from Norway, Singapore, Poland, Canada and other countries also questioned France’s position and reiterated their support for the development of mining regulations.

Other nations, including Costa Rica, Chile and Germany, welcomed France’s statement as reinforcing their own call for a pause in the rush to adopt mining regulations.

“The link between climate change and the ocean is clear,” said Clement Yow Mulalap, the representative for the Federated States of Micronesia. “As a small developing island state, my country is particularly concerned about the cascading changes on the marine environment from climate change.”

At the Global Climate Change Conference (COP27) in Egypt, European Commission president Ursula von der Leyen and Kazakhstan Prime Minister Alikhan Smailov signed a memorandum of understanding (MOU) establishing a strategic partnership between the EU and Kazakhstan.

The agreement aims to ensure the development of a secure and sustainable supply of raw materials and refined materials. It also aims to develop renewable hydrogen and battery value chains to boost the green and digital transformation of both sides’ economies.

As part of the Action Plan on Critical Raw Materials, the European Commission is working to build partnerships with resource-rich third countries, making use of all external policy instruments and respecting its international obligations.

“A secure and sustainable supply of raw materials, refined materials and renewable hydrogen is a key layer to help build a new, cleaner foundation for our economies, especially as we move away from our dependency on fossil fuels,” von der Leyen said in a news release.

“This partnership with Kazakhstan shows Europe’s commitment to work with partner countries on our shared commitments to a greener and more resilient future in line with the Global Gateway Strategy and the objectives of the REPowerEU Plan,” she added.

“The signing of the document will create conditions for the establishment of financial and technological cooperation between Kazakhstan and EU industrial alliances. In general, our country has all the necessary attractiveness factors for European business, including diversified energy sources and high transit-transport potential,” Smailov said in a speech upon signing the MOU.

The partnership is centred around three areas of collaboration: closer economic and industrial integration in the strategic value chains of raw materials, batteries and renewable hydrogen; increasing the resilience of raw material, battery and renewable hydrogen supply chains; and closer bilateral cooperation on capacity-building, skills and research and innovation.

Both the EU and Kazakhstan have committed to develop a roadmap for 2023-2024, with concrete joint actions agreed within six months of the signature of the partnership. These actions are to be carried out in close cooperation with relevant industrial and financial stakeholders from the EU member states and Kazakhstan.

On Tuesday, von der Leyen also met with President of Namibia, Hage Geingob, to sign a similar partnership between the EU and the southern African nation.

South Korean battery makers have urged the U.S. government to factor in realities of a complex supply chain for the industry and not hold the sector to “impossible requirements” ahead of the implementation of new U.S. EV tax credit rules.

LG Energy Solution Ltd (LGES) (373220.KS), SK Innovation’s (096770.KS) SK On and Samsung SDI Co Ltd (006400.KS) expressed their concerns about the electric vehicle tax credit rules in comments submitted to the U.S. Internal Revenue Service (IRS).

Under the new EV rules, to be implemented from Jan. 1, 2023, at least 40% of the value of critical minerals for batteries need to be from the United States or an American free-trade partner for manufacturers to qualify for U.S. tax credits.

That will gradually rise to 80% in 2027.

“It is extremely difficult to build most clean energy technologies, including EV batteries in the United States, without using certain foreign-made parts and, specifically, raw materials extracted or processed in China,” LGES said.

LGES added in its comment that transforming the supply chain cannot occur “overnight” and urged the United States not to hold the industry to “impossible requirements and timelines”.

LGES, SK On and Samsung SDI, three major South Korean battery makers that supply to automakers such as Tesla Inc (TSLA.O), General Motors Co (GM.N) and Ford Motor Co (F.N) among others, together command more than a quarter of the global EV battery market, according to SNE Research.

SK On echoed the concerns.

“A limited interpretation would also risk unintended market outcomes, such as sudden price hikes for suppliers in specific countries, and unnecessarily concentrate processing in limited places. Such market distortions could create artificial costs and barriers along the supply chain,” SK On said.

Samsung SDI also urged the United States to implement rules that allow flexibility to meet supply chain requirements, adding that automotive supply chain contracts often last several years.

LGES has also asked the United States to establish a confidential process to share battery composition, pricing and sourcing information with the Treasury Department to ensure that such sensitive information is not disclosed to competitors.

The U.S. Treasury and IRS started seeking public comment on the new law last month. A total of 821 comments from automakers, parts makers as well as foreign governments have been submitted to the IRS.

Here’s another sign of the world’s lithium frenzy: Chinese factories that typically make ceramics for bathroom tiles are switching to supply the electric-vehicle battery material instead.

Lithium has become super-expensive this year as car and battery manufacturers scour the planet for scarce supplies, and as the industry has hit limits on capacity to refine raw materials into specialist chemicals. That means fatter earnings for producers and — as often happens in runaway commodities markets — some unconventional entrants seeking to make a profit.

The ceramics producers of Gao’an city in China’s Jiangxi province are a prime example. About 15% of the city’s plants have switched from churning out their traditional products to making lithium briquettes that can be further processed into chemicals used in battery production, according to Albert Li, an analyst at Benchmark Mineral Intelligence.

In part, the change reflects the sector’s struggles with overcapacity amid a deep malaise in China’s property market and the impact of higher fuel prices. Yet it’s also an illustration of how the battery supply chain is scouring every available corner to find new sources of lithium raw materials.

Prices of lithium carbonate, a refined material, have more than doubled from the start of the year in China and rose to a new record of 587,500 yuan ($81,349) a ton on Friday. Ganfeng Lithium Group Co. and Tianqi Lithium Corp. — China’s top two lithium producers — both posted major gains in quarterly profits last month.

Lithium has long been used to help bolster the strength of ceramics and to produce more vivid colors in glazes. Ceramics and glass still account for about 14% of all lithium demand, though that’s about halved in the past decade as requirements in the battery sector have surged, according to the US Geological Survey.

Ceramics factories in Gao’an typically take the sludgy by-product of chemicals production from local lithium refineries and use that in their items. Yet with prices of the battery metal trading at a record, even that refinery waste has jumped in value. That’s prompted the companies to reprocess it into lithium-containing bricks and sell them back to the refineries as raw material.

While the volume of lithium supply being added from the converted ceramics lines will be limited, it’s a shift that illustrates the ongoing strength of demand in the world’s key hub of electric-car batteries, according to Benchmark’s Li.

Another factor in the hunt for new sources of supply is that the material being produced in Gao’an is derived from lepidolite, a lithium-bearing mineral that’s often been overlooked as a lower-quality source of the metal. The mineral is under new focus in battery supply chains, and companies including top battery maker Contemporary Amperex Technology Co. and Gotion High-Tech Co. have invested in lepidolite resources.