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EV battery demand dwarfs current key materials capacity

There is an alarming gap between the current production capabilities for key battery materials and projected needs of the global automotive industry. The specialty chemical industry lacks the capital and engineering resources needed to build and operate plants with enough capacity to serve the automotive industry’s needs over the next ten years unless significant new lower-cost, industrially-scalable production technologies are introduced soon.

The total global market for lithium-ion batteries today is about US$10bn, almost all of which are small batteries for consumer handheld devices such as cell phones and laptops. Forecasted introduction of electric vehicles by the automotive industry will create demand for an additional US$70bn of lithium-ion batteries per year by 2020. (1)

One of the most critical components of a battery system is the cathode powder, the main determinant of the cost and performance of the EV battery system. The raw cathode powder as delivered to the cell manufacturer can represent up to 20% of the cost of the fully-assembled battery pack as delivered to an automotive OEM’s assembly line. The cathode powder determines the maximum charge-carrying capacity of the battery, and in large part dictates the power performance of the system as a whole.

There is an alarming gap between the current production capabilities for key battery materials and projected needs of the global automotive industry.

The global market for cathode powders for lithium-ion batteries today is US$2bn. Projected automotive industry demand will drive nearly ten-fold growth, requiring US$15bn of cathode powder per year within ten years.

Manufacturing plants built using state-of-the-art process technologies for cathode powder production require at least US$1 of invested capital for every US$1 of annual revenue, which is fairly typical for specialty chemical manufacturing. Thus cathode powder suppliers would need to deploy at least US$15bn of capital in new plant and equipment to meet projected demand in the next ten years.

To put that figure in perspective, according to the American Chemistry Council, US$15bn is the amount the entire US chemical industry spent for the construction of new facilities for all new products in the last ten years. (2)

The companies that make cathode powders for lithium-ion batteries today have well-deserved reputations as dependable suppliers of high-performance, high-purity materials. The ten largest producers – which include Nichia, Umicore, L&F, Toda, AGC Seimi and Tanaka – account for 70% of the world’s supply. (3)

However, these are generally small companies, or small chemical divisions within larger conglomerates; only one of the ten (Umicore) has total corporate revenues over US$1bn. These companies simply lack the investing and engineering power necessary to support the automotive industry’s projected growth in demand.

To meet the automotive industry’s projected demand, two things must happen.

First, the burden of production of critical materials like cathode powders will have to shift to the major chemical companies that have the resources and expertise needed to deploy large amounts of capital for materials production.

New technologies must be introduced that fundamentally reduce the cost of building and operating plants to produce these critical materials.

Among the world’s 20 largest chemical companies, at least seven (BASF, Dow, Mitsubishi, Sumitomo, Evonik, Asahi Kasei and Mitsui) have strategies to be significant suppliers of battery materials. Several are already established in lithium battery materials (Asahi Kasei in separators, Mitsubishi in electrolytes), but none currently rank among the largest producers of powders. Most have announced initiatives that will lead them into powder production, such as Dow’s joint venture with Korean battery manufacturer Kokam, BASF’s construction of a cathode powder plant in Ohio, and Asahi Kasei’s investment in advanced-cathode developer Envia Systems. This trend will only accelerate.

Second, new technologies must be introduced that fundamentally reduce the cost of building and operating plants to produce these critical materials. My company, Primet Precision Materials, has developed process technology that can cut the costs of building and operating plants for cathode powder production by more than 60%. We are working to prove that technology on progressively larger scales and broader sets of materials.

We expect that Primet’s technology, as well as other innovative technologies in development at other firms, must be adopted by the current and future manufacturers of these critical materials. Otherwise, it’s difficult to see how the automotive industry’s supply network will be able to meet its demands for ever-increasing supply of highly-engineered materials at ever-decreasing costs.

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.

Larry Thomas is the President and CEO of Primet Precision Materials

Throughout his 25-year career in the specialty chemical industry at Air Products and Dow Chemical, Larry Thomas has focused on combining the capabilities of companies large and small through collaborations, licenses and investments to create growth in high-technology businesses.

Primet Precision Materials Inc. is an advanced materials company dedicated to solving the automotive industry’s critical need for high-performance, affordable lithium-ion batteries. Its patented NanoScission process technology allows Primet to offer low-cost, scalable production of high-performance materials at levels unobtainable through traditional manufacturing techniques.

For more information on Primet Precision Materials, visit: http://primetprecision.com/

1. Micky Bly, General Motors, Developing a Battery Value Chain, September 2010.

2. American Chemistry Council, Business of Chemistry (Annual Data), December 2010. Capital spending from 2000-2009 for “Capacity for New Products” as a % of “Capital Spending for Chemicals (excluding Pharmaceuticals)2.

3. Institute of Information Technology, Ltd., LIB-related Study Program 08-09 (March 2009).

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