How India can build a robust value chain for scaled-up battery production
In joining the global race to build capacity for new-age energy storage, India has ventured into the Giga factory arena. Simon Moores, MD – Benchmark Mineral Intelligence, discusses what it takes to set up a Giga factory, Li-ion trends, importance of the value chain, the quality and quantity balance, and much more, in an interesting talk with Ashok Thakur, Chief Editor - ETN.
Minerals are the most important raw material in battery manufacturing. How dependent is the world on them and who are the market leaders in these minerals?
The five key raw materials going into Li-ion batteries are lithium, cobalt, nickel, manganese for the cathode side; graphite and silicon, and other inputs on the anode side. The reason the five key ones are so important for us, and we don't yet include copper, is because these are specialty chemicals, they are not just commodities. A really important point to note is that it is not only the mining of these materials, they have to be chemically engineered and converted into a useful product that can be used in the batteries. So, around the world, the mines that give these raw materials have to work in tandem with the chemical producers.
From a raw material volume supply aspect, the point of concern is about getting enough volume of lithium and nickel in the market to make these batteries, make these EVs. If you are making a Giga factory at the moment, your concern on lithium and nickel should be - 'Can I get enough tonnages?'Well, that is challenge number one with lithium and nickel.
Now, cobalt is also a big concern (not necessarily for the volume and supply that would need to go up) because of the association with child labor in the Democratic Republic of Congo (the largest cobalt reserves in the world are found here). What it means is that there is a rush or a pressure to build new cobalt mines around the world.
Finally, a look at top producers of lithium. It is very interesting geopolitically that it is the Chinese producers who have really pushed the expansions around the world, building new mines. There is Ganfeng Lithium which has been the most aggressive, and Tianqi Lithium has also been doing a good job expanding outside of China. Then of course you have SQM or Sociedad Química y Minera in Chile, and finally Albemarle an American company. SQM and Albemarle are making lithium from brine.
But the main point about these raw materials is - 'we are going from the global supply of raw materials to actually regional'. So, every continent in the world needs to be looking for lithium and nickel and developing new resource bases, not just for the 2020s but also for the 2030s.
You have mentioned how China dominates and controls this market when it comes to price, processing, etc. How does someone understand the importance of China in this entire value chain?
China is really important because it has led the scaling of these battery supply chains since day one over the last fifteen years. It is not necessarily about dominating the mining side or the resource side, that's what Mother Nature gives you; it's about dominating the mid-stream of the supply chain. China mines only 23 percent of the battery raw materials, but it refines 80 percent of the chemicals. So, for a country like India that is looking to build this supply chain from scratch - even if you don't have the raw materials, you should look at building huge chemical capacity and huge mid-stream battery supply chain capacity; and all those raw materials will start to flow into your country. That is what China has done and that is what other countries are now trying to replicate.
How has Europe been able to suddenly secure its minerals for the Giga factories it is building? Despite its late start, Europe is now at the forefront of the gigafactory race, even indicating a lead over China. How have they been able to achieve this?
The majority of the European continent that is building these assets, battery plants, planning new mines, has been very proactive in a top-down approach. The EU governments are saying we need to build electric cars; we need to build batteries; we need to build the supply chain for batteries; that message is number one. Number two, they brought together the European Battery Alliance, which allows industry, money, the European Bank, and government as well as policymakers to sit in the same room, read from the same hymn sheet, and get a plan together. Everyone mustn't be talking about a different book, that in the room they are on the same conversation. That is crucial.
The third thing is they put money into it. So, the EU at the moment is committed to building the supply - not building batteries but building the supply chain for batteries. It is nowhere near enough, but €3 billion is a reasonable amount to kick-start several developing companies in this space. All of these efforts make sure industries line up in the same direction and that they are not going off on tangents. That has been really at the core of the success in Europe.
In line with India's 50 GWh announcements with the material of 60 percent of value-add criteria; how, in your experience, should India go about it? What would be your expert advice?
It is a good thing for India that it is announcing Li-ion battery capacity because the simple principle is if you are making vehicles of any kind that needs to be electrified if you need energy storage - in terms of storing solar power, then you need to make Li-ion batteries domestically. You can't ship these over long distances in huge volumes; they are registered as hazardous goods. This is at the core of controlling this future industry as well. This means that for domestic battery capacities, where 50 GWh is a start, India will need 500 plus. But it is a start and unless people start discussing it domestically in India, it will not take off.
Now the value-added criteria – it is also very good that they announced it in conjunction with the 50 GWh. As I mentioned before, it is not just about mining these raw materials, it is about refining them and making these chemicals. Control over the mid-stream of the supply chain, the lithium hydroxide, the nickel sulfate, the cobalt-hydroxide, that goes into the cathodes; the graphite that goes into the anodes. Once you have those two links, you can then make Li-ion batteries that are majority refined and produced in India. The Indian government is thinking in the right terms from the outset.
Announcing Giga factories has become a norm with Europe, and even China has announced achieving 1000 GWh capacity. At this scale, where would India, with a humble 50 GWh target stand? Can India's Giga factory value chains survive in the midst of these massive announcements? How will this price trend work for us, with our capacity target?
With the capacity mentioned for India, the only way you can control the future of your car industry and the future direction of the energy industry through storage is to have a huge capacity of Li-ion batteries. Now, to control the price of those batteries, you need to make them at scale and maintain the quality as well. I think that people need to understand also that Li-ion batteries are a specialty, not a commodity.
There are tiers of quality in what gets to the market. So, to have huge scale, quality, and reduced battery costs; I think you need to be making batteries (NCM) at $110 a kWh or lower. It could also be LFP batteries, which are already around the $85 mark. Many chemistries can be added to this mix. Going forward really is about announcing more and more capacity and encouraging mid-stream on the supply chain to be built at the same time, so you have these clusters of domestic and international companies in India that are all pulling in that same direction.
What criteria influence prices? India, for example, is looking for minerals for its 50 GWh; can it afford the international prices at which China, Europe, or the US source? And secondly, is the quality standardized globally yet, so everybody gets the same quality at the same price, or will it be a factor to consider?
For the raw materials, the pricing is really important. At Benchmark we set the lithium industry's reference price; we collect nickel, cobalt, graphite, manganese raw material prices. Those prices, especially with lithium, are used in the industry in contracts to help stabilize volatility, to help give an independent perspective of what the real price is. The reality of this is that there is no one price for lithium. There are many grades, there are many trade routes, there are many negotiations. So, when someone is buying lithium in large contracts, in tens of thousands of tons a year, they will have to sit around the table, have a conversation, negotiate, go back and forth, write it down on a piece of paper, and that will be the deal.
Now, that is where Benchmark's prices come in; because they pick up our prices and they negotiate. That is the way the real world works at the moment for these raw materials. For Indian companies to lock up those raw materials, long-term contracts need to be negotiated. These are ten-year contracts or they can be up to ten years now. That gives these mining companies confidence that we can build new mines. It is very important, especially for lithium, since anything after 2025 has to be built.
Long-term contracts with new emerging producers, with the governments, where governments can back these contracts; this is where India can get a real advantage, allow the world's leading producers of lithium to built more mines and build more processing plants. Maybe build a lithium-hydroxide plant in India, for example.
All these are options, but the industry that we are discussing, nearly all of it, has not been built yet. And it is so important to have these long-term visions, ten-year-plus visions of where we need to be because at the moment that's not happening anywhere.
Most of the metals and mineral prices appear to have five-year peaks. Do you think these prices will remain high for some considerable time and will this impact the price of batteries? What impact would that have on global pricing?
I actually see this as price volatility. Prices go up, prices come down, prices go up again and they come down. Previously that has happened in our industry on maybe ten-year cycles, maybe twelve- or thirteen-year cycles. Because these are niche industries, the prices are pretty fixed. Now, lithium and cobalt are the two battery raw material proxy prices. Nickel, graphite, and manganese are different, because these are much bigger industries, serving lots of different industrial markets like steel, glass, ceramics, or others.
The key thing for me is that lithium and cobalt, their prices are driven by a Li-ion battery industry and hence driven by EVs because over 50 percent of each of those industries goes into batteries. Around 59 percent of lithium and 63 percent of cobalt, in tonnage, this year will go into batteries.
What that is going to mean is that prices for the next decade will be volatile. And when lithium prices go up, they will be going up for a good three years or so, because it takes that long to bring on new supply to help balance out the supply-demand difference. This means lithium prices started going up back in November. I think this trend will continue for another two and a half years and I think, then, when new supply comes on, the price will come down naturally. But it will only go down to the level where it can incentivize these supplies. I think that level is about $9- to $10,000 a ton. With lithium and cobalt especially, you have to brace yourself for a decade of volatility and price spikes.
Finally, nickel and those other raw materials I mentioned, are very much part of this commodity super-cycle. There are a lot of other factors pushing that price up, not necessarily EVs, because batteries are like a single-digit percentage of these industries. I would always look at lithium and cobalt as the proxy for batteries.
Several solid-state batteries like lithium-sulphur and other chemistries are being quoted as next-gen technology and will be available in the market. As per your understanding, is there a supply chain ready to support these technologies?
For some of these, I think the supply chain is there in know-how. It's not there in scale or cost, but it's there in know-how. It always gives me confidence that many companies know how to make lithium metal foil for solid-state batteries, for example. And the mines are then in place, you can use existing lithium mines to supply that mid-stream process. Now, for me, the challenge with solid-state is that they still have to use a solid-state battery in an electric vehicle. That hasn't happened at scale yet, it hasn't happened even at a small scale. I think solid-state is the heir to the throne of Li-ion. But the big question is - at what cost can they do it? Can they build it at scale? Can you see the rise of these battery mega-factories like we have seen for Li-ion, which has gone from five to 212 in six years? Will you see that in solid-state? Can it compete on cost; can the costs carry on coming down to Li-ion? You have all these real-world economics that really tie into it.
I actually think it isn't one or the other. I think solid-state has a place in niche applications, in high-end applications for EVs. I think we might see that by the end of the decade. I think this is the time zone, the time frame. But the world is becoming battery-powered, nearly every part of transport will be battery-powered in some way. That means the size of this pie is growing all the time. It's a growing pie that has room for lots of different battery types. The dominant for many, many years or decades will be NCM, NCA chemistries - the nickel cobalt manganese, the nickel cobalt aluminum chemistries. Then, of course, you have LFP that is going to play an important role as well. Solid-state will be the specialist niche application. But you know what, let's discuss this in 2032 because then it might start to change and we'll see what happens. But solid-state, a lot of promise, a lot to be proven in the 2020s.
As an expert, what would be your suggestions to the companies that are considering a position in the Li-ion Giga factory race? What would be the three or four points you consider as core advice?
One has to understand that it is a specialty industry; it is quality and quantity, not just quantity, you have to balance the quality and the quantity. That is the number one point for everyone, whether you are making batteries or chemicals. Mining is a bit different because that is obviously a scale thing. Quality and quantity are number one.
Point two: to achieve this you need to a) have money and a good amount of backing, and b) do as somebody has done it before. Get technical experts on board, industry partners, people that have produced lithium chemicals, nickel chemicals at scale and ideally for the battery industry. Have those guys as your partners: JV, percentage of the company, whatever. Because that will increase your likelihood of success, and the odds are not on your side in this thing. They are usually against you because of the technicalities of the supply chain. If you increase your odds of success, it will speed up the timeline by a good five-six-seven years. And I think that is crucial because right now, time is of the essence. If you want to take advantage of this once in a generation, not even that, once in a 100 years trend, then you need speed as well. So, you need speed, you need quality, and you need quantity. I think that is my takeaway.
How important is the G-7 Summit, one of the most important summits, for the batteries industry?
The fact that the G-7 was talking about the Li-ion batteries, about the raw material going into Li-ion batteries is a huge step forward for the discussion, I think. What that shows me is that Li-ion batteries are now geo-political. Governments talk about batteries specifically; if they talk about the supply chain feeding them, even better. You have seen this with the G-7, where we mentioned the European Union strategy that we have discussed earlier in the interview. Similarly, recently the White House has done an amazing job in the last three-four months to actually put together a plan that not just builds Giga factories in America, but the supply chain to feed it.
In the American Job's Act, or the American Job's Plan that President Biden's team has put forward, it has to go through the House of the Senate, so we'll see what happens. But the fact the White House is talking about Li-ion batteries means the discussion isn't going back, it's only going forward in a much quicker direction. It was carried out with the G-7 - we were happy to play our part and carry that message, and I think now you're seeing domestic governments talking about Li-ion batteries. It's pretty amazing and it shows you that Li-ion batteries are a platform technology. This isn't just batteries like in your mobile phone that you are used to. This is a technology that creates trillions and trillions of dollars of industries upstream and downstream. And I think to me that is the most important factor, and I think governments around the world realize that.
[Benchmark Mineral Intelligence is a London-based, world-leading price reporting agency and data and intelligence provider, extending from Li-ion batteries to the electric vehicle supply chain.]