Shared from the 12/17/2019 Financial Review eEdition

Demand for batteries charging up

Picture

The battery anode coating operation at Novonix’s North America facilities.

Trade tensions between the United States and China are raising concerns about the certainty of supply for a range of essential materials that are commonly used in electronics, defence and energy-related technologies.

Analysts say certain rare earth elements and metals sourced from China may become more expensive, or perhaps unobtainable, if the bilateral trade tensions and punitive tariff regimes continue.

But while the current trade talks are triggering palpitations among governments and businesses, the longer-term forecasts for demand of strategic minerals is causing even greater concern.

Demand for lithium-ion batteries is forecast to rise tenfold over the next decade, and that is forcing businesses and governments to forge plans for a reliable supply of raw materials and to rethink battery technology.

Global competition for strategic materials such as cobalt, lithium and graphite is already fierce and, with China being the biggest supplier as well as a rapidly expanding user in its manufacturing processes, guaranteed access is uncertain.

These concerns have been highlighted in a recent Congressional report, which warned that China has intermittently used its market dominance to punish trade partners by banning exports of strategic minerals.

US manufacturers rely heavily on imports of rare earth elements for technology manufacturing. In particular, batteries manufacturers require long-term access to cobalt, lithium and graphite for the production of lithium-ion batteries.

As China’s need for rare earth elements to supply its own lithium-ion batteries makers increases, the global market will tighten – and that will have commercial ramifications for battery makers around the world. It is also likely to have strategic ramifications: many aspects of defence forces are increasingly reliant on batterypowered technology.

As Reuters recently pointed out, US President Donald Trump’s left-field idea of acquiring Greenland appeared to stem from his unorthodox view of how the US might shore up its long term supply of strategic minerals.

The United States’ vulnerability in the rare earth elements segment is underscored by the market for graphite, which is essential to the manufacturing of anodes in batteries.

While China controls about 95 per cent of the world’s supply of natural graphite, it is increasingly importing graphite from low-cost mines in Africa. At the same time, the US is almost 100 per cent reliant on China as a source of natural graphite.

In September, nine countries agreed to a US initiative for a concerted push to discover and develop new reserves of rare earth elements. Australia, alongside Canada, Chile and Peru, is one of the signatories to the international group.

Geoscience Australia estimates China has about 38 per cent of the world’s economically viable rare earth resources; Australia has about three per cent. In 2018, China produced 72 per cent of the world’s total output of rare earth materials; Australia was the second biggest (11 per cent) followed by the US (9 per cent).

As well, the US Department of Energy has been offering grants for the development of better materials to put into batteries and more efficient battery production.

A US Senate committee this year heard there were 70 mega-sized, lithium-ion battery manufacturing plants under construction worldwide. Forty-six of these huge facilities will be built in China, but only five in the United States.

Simon Moores, the head of consultancy firm Benchmark Minerals Intelligence, told the committee the demand for lithium-ion batteries is “unprecedented” as vehicle manufacturers step up production of electric-powered cars and light transport vehicles.

As well, cleaner energy requirements imposed by governments, and a shift by businesses and consumers to renewable energy sources, have necessitated the development of industrial-scale, high-performance, battery-based energy storage systems.

Mr Moores noted the global commitment to mega-sized battery-making facilities had increased fourfold since 2017. If all 70 facilities proceeded and operated at full capacity, then demand for supplies of lithium would rise eightfold by 2028, graphite anode sevenfold, and demand for cobalt would quadruple.

“Those who control these critical raw materials, and those who possess the manufacturing and processing know-how, will hold the balance of industrial power in the 21st century auto and energy storage industries,” Mr Moores told the committee.

One of the companies preparing for a surge in demand as consumers and businesses switch to electric vehicles is Australian-based Novonix, which makes a high-performance, synthetic graphite anode material for use in lithium-ion batteries.

Novonix has just announced a breakthrough deal to supply SAMSUNG SDI anode material – a first for an ASX listed US-based company.

Novonix managing director Phil St Baker says US manufacturers of lithium-ion batteries are almost totally dependent on China for imports of all materials that go inside the battery case.

Yet synthetic graphite, derived from petroleum feedstock, can also be used to make battery anodes. Indeed, Mr St Baker says synthetic graphite generally provides a much longer lasting anode, and that makes it ideally suited for batteries installed in electric vehicles.

“Electric vehicle batteries need premium, longlife battery material,” St Baker said, adding that batteries used in electric vehicles, home and grid battery storage need to last more than a decade.

See this article in the e-Edition Here