How big?
LG CHEM / HUAYOU COBALT DEAL RESHAPES CATHODE LANDSCAPE FOR ELECTRIC VEHICLE BATTERIES
11th April 2018Batteries,
China,
CobaltBenchmark Mineral Intelligence
Korean battery major LG Chem and China’s Huayou Cobalt have announced a huge deal to launch two plants that will have a significant bearing on the lithium ion battery industry’s cathode direction.
The partnership will see a 40,000 tpa lithium ion battery precursor plant and a 40,000 tpa cathode plant being constructed within China over the next 18 months. Both are being installed with a capacity expansion to 100,000 tpa each in mind.
It is the world’s most significant deal between a raw material miner and lithium ion battery manufacturer to date.
It is also a major move by a battery manufacturer to control such a large cathode manufacturing capacity, confirming fears that present cathode producers are not or cannot expand quick enough.
The total investment is in excess of $440m and lays out the formation of two separate joint-venture companies: Huajin New Energy Material (Quzhou) Co.,Ltd and Leyou New Energy Material (Wuxi) Co,Ltd.
For the purpose of the JV Huayou incorporated a new subsidiary Huayou New Energy Technology Co. Ltd. which deals with LG Chem directly.
Huajin is majority owned by Huayou (51%, remainder LG Chem) and will have the capacity to initially produce 40,000tpa of lithium ion battery precursor.
Leyou is majority owned by LG Chem (51%, remainder Huayou) and will have the equal capacity to produce 40,000tpa of lithium ion battery cathode.
The announcement states that the plants will be largely equipped to produce both nickel cobalt manganese (NCM) and nickel cobalt aluminium (NCA) technologies.
A decision on this direction or the final NCM to NCA split is yet to be made, but LG Chem is a major producer of NCM batteries for electric vehicles.
Perspective
To put the size of the deal into perspective,
Benchmark Mineral Intelligence estimates that in 2017 Umicore was the world’s largest cathode maker producing 24,000 tonnes of material.
The JV arrangement enables the two companies to control the entire value chain from raw material production, owned by Huayou in the DRC, through to finished cells with LG Chem battery operations located in South Korea, China, Poland and the US.
LG Chem is a major producer of batteries for General Motors’ / Chevrolet’s Bolt and Volt EVs through their lithium ion battery plant in Holland, Michigan which has a 3GWh capacity and will be expanding to double this number over the next 2 years.
The plant is also one of 30 lithium ion battery megafactories that Benchmark Mineral Intelligence is tracking.
The cobalt deal confirms that downstream companies such as LG Chem are increasingly concerned with securing a reliable source of raw materials, and in order to meet their expected future demand they are prepared to invest and become vertically integrated in the value chain.
With such significant expansions needed throughout the supply chain in order to meet forecasted demand of lithium ion battery raw materials, question marks have hovered over how the industry will fund the capacity expansions.
This JV structure is just one of a number of ways the industry is tackling the issue, with shared risk among the two parties and an agreement to provide each other with “competitive pricing” for processed products.
