Although China continues to dominate the global lithium-ion battery supply chain in 2020, there are positive signs coming out of Europe helping it, alongside the UK, climb up the BloombergNEF rankings published Sept. 16.
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According to the BNEF intelligence, China's success results from its large domestic battery demand, 72 GWh, and control of 80% of the world's raw material refining, 77% of the world's cell capacity and 60% of the world's component manufacturing.
In 2020, Japan and South Korea rank number two and three respectively. While both countries are leaders in battery and components manufacturing, they do not have the same influence in raw materials refining and mining as China. What they lack in the control of the raw materials supply chain, they make up for in higher environmental and RII (regulations, innovation & infrastructure) scores compared with China, the report said.
The UK came in at number seven, with Germany in joint fourth spot with Canada.
BNEF's head of energy storage, James Frith, said: "China's dominance of the industry is to be expected given its huge investments and the policies the country has implemented over the past decade. Chinese manufacturers, like CATL, have come from nothing to being world-leading in less than 10 years. The next decade will be particularly interesting as Europe and the US try to create their own battery champions to challenge Asian incumbents who are already building capacity in both places. While Europe is launching initiatives to capture more of the raw material value chain, the US is slower to react on this."
The entire battery supply chain, from mining to end-user, needs to be as green as possible for the electric vehicle market to maximize its ambitions for a lower-carbon future, Vulcan Energy's vice-president for business development, Vincent Ledoux Pedailles told S&P Global Platts Sept. 10.
In the wake of the coronavirus pandemic, local supply chains have been thrust into the spotlight, as environmental, social and governance metrics continue to climb the ladder of importance for investors.
The European Battery Alliance has called for investment in the value chain -- from extraction of raw materials all the way through to recycling at the other end of the value chain -- to build the industry and create job security.
Pedailles said the recent pandemic had amplified the need not only for local supply chains, but also a reduced carbon footprint across mining and processing of lithium. He, like others, argued that the footprint of EVs could be hindered if the materials going into manufacturing them came from highly polluting practices.
As EV demand grows there is an increasing need for cell manufacturing facilities close to automotive production. This has led to a boom in European cell plants, and the rest of the supply chain is also slowly making its way to Europe, BNEF said. The growing industry within the region and Europe's strong environmental credentials helped a clutch of European countries place in the top 10 for 2020 [Sweden, France, Finland and Germany].
US may move up the table by 2025
The US languished in sixth place in 2020 but the upcoming presidential election could change things, the research added. If the US were to increase its investment in raw materials and promote EV adoption, it could rise to number three and be number one in cell component manufacturing in 2025, according to BNEF. By contrast, the UK's position in the rankings could fall in 2025 to number eight if it becomes unable to access the large demand in continental Europe, which, at 152 GWh, will be around five times the size of its domestic market.
"A key concern of many raw materials producing countries is how to leverage resource wealth into more value-add, and attract further downstream investments, like battery manufacturing. Key distinguishing factors are the environmental footprint of industry, the availability of cheap but clean electricity, a technically skilled labor force, and incentives driving battery demand. These factors may be more important than a monopoly on one specific critical metal," head of metals and mining at BNEF, Sophie Lu, added.
Sustainability and carbon emissions associated with the supply chain are of growing importance. Making sure that the electricity used in material processing and cell manufacturing is low-carbon is vital. France performed best in the environmental category, helped by its electricity grids low carbon emissions factor, at 28g CO2/kWh in 2019. The introduction of carbon border taxes as proposed by the European Commission and US Democratic presidential candidate Joe Biden could give regions or countries leverage to secure localized supply chains.
"Access to raw materials, talent and infrastructure are vital in attracting investment into the value chain. In addition to making significant investments into mining of critical minerals all around the world, China is also the dominant player in materials refining. This has given it the advantage over Japan and [South] Korea. Other countries seeking to be dominant players in the overall value chain may need to support upstream metals mining and refining development, while also formulating policies that will safeguard the environment." BNEF's lead analyst covering battery raw materials, Kwasi Ampofo, said.