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Members from Asia’s electric vehicle (EV) supply chain are committing vast resources to the battery sector, in response to rising costs led by inflationary pressures in raw materials and logistics.
The sourcing of essential raw materials has become increasingly important as both the EV and battery power sectors continue to grow. The Asia-Pacific electric vehicle supply chain industry has seen tremendous growth, with China dominating the EV market and South Korea excelling in the battery production sector. According to EV-Volumes data, about 2.96 million EV battery vehicles were sold in Asia-Pacific in 2021.
Meanwhile, the APAC EV battery market is predicted to grow at a CAGR of more than 16.5% between 2022-2027, reaching a value of almost $134 bn from $46.26 bn during the given period, Mordor Intelligence data suggests.
Rising demand for raw materials
In a bid to ride the electric vehicle wave, EV battery manufacturers are planning major expansions to satisfy the rising demand for battery resources, which will remain scarce this year.
Asia’s EV battery manufacturers, auto companies as well as material suppliers have started focusing on the production of nickel, cobalt, lithium and other strategic raw materials that are integral to batteries’ supply chains. Rising demand for these metals clubbed with a short supply has inflated costs for many manufacturers.
Commodity markets have been eking out fresh highs, following Russia’s invasion of Ukraine and the subsequent imposition of trade sanctions on Moscow. Global nickel prices have soared by about 400% this year. Meanwhile, lithium carbonate continues to soar in 2022, after more than quadrupling in value last year.
Cautioning that EV battery supply will remain limited this year, Wood Mackenzie consultant Jiayue Zheng said “Electric vehicle market accounts for almost 80% of lithium-ion battery demand and high oil prices are supporting more markets to roll out zero-emission transportation policies, causing demand for lithium-ion battery to skyrocket.”
According to the expert, EV battery shortages last year were caused by high demand and increased raw material costs. Zheng anticipated that the electric vehicle market, which accounts for over 80% of present battery demand, will amount to 3TWh of device storage capacity by the end of the decade.
The consultancy firm stated in its report that EV battery manufacturers are responding to this rising demand with massive expansion plans. According to WoodMac, China’s Contemporary Amperex Technology Co. Ltd. (CATL) intends to build more than 800GWh of production capacity by 2030, while its South Korean rival LG intends to build approximately 450GWh of plants during the same period. Japan’s Panasonic, intends to produce 300GWh per year.
Out of Asia, China has become a major player along the entire lithium-ion cell supply chain despite South Korea’s longer experience in lithium battery production. Chinese manufacturers such as CATL and BYD have been able to grow and expand, thanks to the government’s large investments and supportive regulations. Meanwhile, South Korea’s LG Energy Solution, SK Innovation and Samsung SDI combined hold a third of the global market in EV batteries.
China’s manufacturers expand into raw material supply chain
According to Bingyao Chen, Investment Analyst at Mirae Asset Global Investments, the battery market in China has also seen rapid growth throughout 2021 due to the rising demand. This has led major battery players to announce plans for expanding capacity aggressively.
China’s CATL is the world’s biggest maker of batteries for electric vehicles, accounting for about 30% share of the global EV battery market. In a recent meeting, CATL executives said the company will secure its supply of lithium through a variety of measures including long-term supply contracts, recycling used batteries and digging its own mines. It has also raised prices for some battery products due to rising raw material costs.
Meanwhile, Volkswagen China has signed a memorandum of understanding with Chinese firms Huayou Cobalt and Tsingshan. To secure nickel and cobalt supplies, the first joint venture (JV) will be formed in Indonesia, while the second JV will be formed with Huayou in China’s southwestern Guangxi region, to focus on refining nickel and cobalt sulfates, precursor and Cathode active materials (CAM) production. At the venture’s final stage of expansion, this will amount to an annual output of about 120,000 tonnes of nickel and 15,000 tonnes of cobalt, enough raw materials supply for 160-gigawatt hours’ worth of electric vehicle batteries.
“The two partnerships target to contribute to the Group’s long-term target of a 30-50% cost reduction on each battery,” Volkswagen China Group said in a statement.
Meanwhile, Chinese Tsingshan, the world’s top nickel producer, has major investments in Indonesia including other joint ventures with Huayou.
Chen expects this kind of competitive landscape to last for some time yet into the future.
South Korean companies not far behind
To catch up with Chinese competition, South Korean conglomerates have also announced heavy investments. Manufacturers of chemicals and materials are also taking steps to bank on the growing demand for batteries and the electric vehicle sector.
South Korean steelmaker POSCO Chemicals plans to invest $4 bn in a new lithium mining project in Argentina. POSCO aims to manufacture 25,000 tonnes of lithium hydroxide initially and targets a total capacity of 100,000 tonnes once the project is completed.
South Korean companies are also expanding towards the production of CAM. Earlier this month, the POSCO announced a JV with General Motors and contracted Bécancour, Quebec, for the construction of a $400 m CAM plant. The company is already building a 300,000 ton per year CAM production and precursor plant in China.
In January, LG Chemicals announced plans to invest about $418.52 m by 2025 for building a CAM plant for batteries in Gumi, South Korea, with a production capacity of 60,000 tonnes per year.
South Korean firm Lotte Chemicals, which sells general purpose petrochemicals, is also betting on EV battery material for growth. To make electrolytes and cathode material, the company is considering plans for a plant in the US state of Louisiana, which is expected to be ready by 2025.
