Falling lithium prices cool investment in sodium-ion batteries

China hoped to bring sodium-ion batteries to mass market in 2023, but slumping lithium prices have delayed those ambitions.

Sodium-ion batteries emerged as a promising alternative to lithium-ion batteries when surging prices for lithium led automakers to look for lower-cost chemistries. Sodium carbonate is one of the most abundant elements and is widely available. Sodium-ion batteries do not contain any lithium or cobalt, and it is technically possible to eliminate nickel and reduce copper content.

Yet lithium prices have fallen to their lowest since January 2022 due to a gloomy macroeconomic outlook, weaker demand and excess supply, according to S&P Global Market Intelligence data. This has erased the price advantage for sodium-ion batteries and chilled investment. Chinese sodium-ion battery-makers that announced plans to build 275.8 GWh of manufacturing capacity by the end of 2025 have delayed or paused most of those projects, as it is expected to take longer to commercialize at scale and bring down costs, research firm EVTank said in a July report.

"With lithium prices surging, sodium-ion batteries had grown in popularity in 2021 and 2022, but now, it is slowly on the wane as lithium prices fall," Cao Yuliang, chairman and chief scientific officer of Shenzhen Jiana Energy Technology Co. Ltd., said Oct. 17 at a Shanghai Metals Market industry forum.

Slump in lithium prices removes incentives

China took an early global lead on sodium-ion batteries as part of its wider efforts to reduce reliance on imported battery metal ore, drawing on the country's experience in building a complete battery supply chain. China is estimated to have had 10 GWh of sodium-ion battery manufacturing capacity as of June, and the country is expected to reach 39.7 GWh in operating capacity by the end of 2023 despite the price challenges, according to EVTank.

Among the major cathode types used in sodium-ion batteries, the layered oxide cathode is the closest to commercialization, industry players and analysts said at the recent industry forum.

The manufacturing process of layered oxide cathodes is similar to that of nickel-manganese-cobalt (NMC) batteries, and some NMC factories are able to produce layered oxide cathodes without revamping their production lines, Jerry Liu, CEO of Jiangsu-based cathode producer SIMT Nayuan New Materials, told S&P Global Commodity Insights on the sidelines of the conference. However, there are no incentives for manufacturers of NMC batteries to produce sodium-ion batteries due to the slump in lithium prices.

Layered oxide cathodes demonstrate low capacity and lower cycle life, while gas evolution and quality control remain issues in manufacturing, Liu said during the conference.

Layered oxides, polyanionic compounds and Prussian blue analogs (PBAs) are the three more promising cathodes for sodium-ion batteries.

There are key scientific issues that need to be resolved with polyanionic compounds and PBAs, Liu told the conference. A PBA cathode has rigid open framework and high stability, making it easy to prepare, but its structure is prone to absorbing water in the air, which would reduce the cycle life and generate highly toxic hydrogen cyanide on heating above 350 degrees C. Polyanionic compound cathodes have high structural stability and high energy density, but their ionic and electronic conductivity is poor, which causes severe capacity degradation, according to Liu.

"Sodium-ion batteries' development is much slower than expected, so we decided not to think about investing in sodium-ion battery makers until next year," a new investor in the energy supply chain told Commodity Insights.

The investor's company recently cut its 2023 forecast of the downstream industry's installed capacity for sodium-ion batteries from 10 GWh to less than 1 GWh. Lithium carbonate prices are definitely a key concern, given a market view that sodium-ion batteries would lose competitiveness when lithium carbonate prices fall below 150,000 Chinese yuan per ton, the investor said.

Opportunities down the road

Sodium-ion batteries still look promising for two-wheelers and energy storage, even if the lithium price drop has slowed progress.

"Sodium-ion batteries are typically safer than [lithium-ion] and have higher resistance to low temperatures and relatively quick charging times. But sodium ion's lower energy density per mass and energy density per volume mean batteries must be larger, limiting their use in electric vehicles, portable electronics and residential storage," Commodity Insights said in a September research report. "They are best suited to applications that do not require exceptional power, capacity or life cycle, such as [battery energy storage system] transportation categories that prioritize cost over performance and driving range, such as two- and three-wheeled vehicles."

In the two-wheeler EV market, sodium-ion batteries' share could reach half that of lithium-ion batteries within three years, or at least 24 GWh, Lei Baorong, president of Chinese e-bike producer Jiangsu Xinri E-Vehicle Co. Ltd., said at the conference. Xinri launched its first two-wheeler powered by sodium-ion batteries in August.

Sodium-ion batteries could replace lead-acid batteries in energy storage systems and the two-wheeled EV market. The costs are nearly the same, but sodium-ion batteries are lighter and safer than lead-acid batteries, Lei said.

Despite lower energy density and shorter cycle life, sodium-ion batteries provide better safety performance, and their costs could be 30%–40% lower than that of lithium-ion batteries after reaching commercial scale, Lei said. Plentiful sodium carbonate supplies could help reduce cathode costs, Lei said. Sodium-ion batteries could also use cheaper aluminum foil as current collectors to replace copper foil, use soft or hard carbon to replace graphite as anode material, and reduce electrolyte usage, according to Lei.

Some ambitious automakers are ready to use the battery technology to power new mini-compact models. Contemporary Amperex Technology Co. Ltd.'s first sodium-ion battery will power Chery Automobile Co. Ltd.'s EV motors, and battery-maker Farasis Energy (Gan Zhou) Co., Ltd. will supply sodium-ion battery packs to Jiangling Motors Corp. Ltd., according to a June document from China's Ministry of Industry and Information Technology.

In the energy storage system market, sodium-ion batteries are likely to replace a portion of lithium-ion batteries after 2025, Hao Jiahui, energy storage consulting director at Shanghai Metals Market, told Commodity Insights on the sidelines of the conference. To achieve this, the industry has to reduce the costs of both anode and cathode materials. But the cost of hard carbon, the major anode material for sodium-ion batteries, remains high due to technology barriers, while sodium hexafluorophosphate, the electrolyte of the batteries, is expensive due to low demand.

Chinese sodium-ion energy storage systems recorded significant revenue losses in the third quarter — 32% for layered oxide cathodes and 18% for polyanionic compounds, while lithium-ion storage systems had an average 3% gross project margin, according to Hao's calculations. Hao expects the gross profit margins of sodium-ion batteries with polyanionic compound cathodes to increase to 37% in 2025, compared with 18% for lithium-ion batteries.

As of Oct. 27, US$1 was equivalent to 7.32 Chinese yuan.

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