Recap 2020: Top 5 Battery market leaders and Lithium Suppliers

Technologies such as electric vehicles and solar energy are gaining heavy traction in recent years. But there is one technology in particular which is extremely important for the feasibility of other upcoming technologies, and that is Battery Technology, lithium ion in particular. Prices of Li-ion batteries have been falling astronomically since the energy revolution began. In this article we will look at some of the trends of lithium ion batteries in 2020.

Fig 1: Falling prices of Lithium-ion battery packs

While many people may be familiar with Tesla, there is an entire ecosystem of battery producers and lithium mining firms that are playing critical roles in this transformation. At a high level, the industry’s ecosystem starts upstream with lithium miners that extract the metal from the earth. These raw materials then move into the chemical conversion process to produce lithium carbonate or lithium hydroxide. Battery producers combine carbonate or hydroxide with materials to form a cathode and an anode, together forming an individual battery cell. Thousands of cells may be combined to create a battery pack for an Electric Vehicle.

The Top 5 Battery Market Kings

By 2020, there were 5 companies which supplied almost 86% of the world’s lithium ion batteries; LG Chemicals, Panasonic, BYD, CATL, and Samaung SDI. The figure below shows the market share of these companies and the cumulative manufactured capacity.

Fig 2: Cumulative battery market share

In October 2020, more than 82% of LG Chem shareholders voted in favor of the plan to split the battery business into a new wholly-owned subsidiary, tentatively named LG Energy Solutions. It means that on December 1, 2020, the new wholly-owned subsidiary will come alive and it will open the way to offer up to 30% of its shares in an initial offering at some point in 2021. Since the battery segment is responsible for 42% of the revenues and it has become profitable and has a huge potential to grow, it might be a very promising IPO. The two advantages of the split will be better, more-focused management and broader possibilities to raise capital for further growth.

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CATL is the world’s second-largest battery producer=, behind LG Chem. CATL is a Tier 1 battery producer(battery company), joining the select group of LG Chem, Panasonic, Samsung SDI, Tesla, SK Innovation, and AESC. What distinguishes CATL is that it is the battery maker with the largest number of relationships with OEMs, including Tesla, BMW, Daimler, Geely, Great Wall, Honda, Hyundai, Volkswagen, and NEVS. Tesla is a key relationship for CATL. In February 2020, the two companies agreed to produce batteries for EVs manufactured at the Gigafactory in Shanghai, Tesla’s second battery megafactory. Tesla is currently producing Model 3’s at an annualized rate of 250,000 EVs. Helped by CATL’s cobalt-free lithium iron phosphate (LPF) batteries and local procurement, the Model 3 is the lowest priced premium midsize sedan in China at $36,800.

Panasonic’s efforts in the EV supply chain are well known, particularly through its relationship with Tesla. In 2014, Panasonic and Tesla partnered to build Giga Nevada, the world’s largest lithium-ion battery factory. Recently, Panasonic started working on Tesla’s featured battery cell called 4680. The new format is expected to store more energy and have an easier manufacturing process, two keys to further reducing battery costs. Currently, a battery represents approximately 29% of the total cost of an EV. As EV manufacturers seek to gain market share from Internal Combustion Engine(ICE) vehicles, reducing battery costs is critical. 

To date, Panasonic is the sole provider of lithium-ion batteries to Tesla for EVs manufactured in the U.S. But Panasonic is also expanding its EV battery customer base beyond Tesla. The company recently partnered with Toyota to build a lithium-ion plant in Japan to supply 500,000 EVs starting in 2022.

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The Lithium Supply Market

The Lithium Supply market is highly oligopolistic in nature. Albemarle, Ganfeng Lithium, SQM, Tianqi Lithium, and Livent control more than 70% of the world’s lithium supply.

Fig 3: Lithium Supply Share

Albemarle is a specialty chemicals company headquartered in Charlotte, North Carolina, and employs around 5,000 people worldwide. In response to growing global demand for EVs, Albemarle announced an increase in capacity at its Silver Peak lithium production facility in the US state of Nevada. Albemarle will invest $30 million to $50 million to double production there by 2025. To strengthen its domestic value chain for the North American EV market, Albemarle is making the aforementioned investment in Silver Peak starting in 2021. Lithium is extracted on site from brine in the Clayton Valley basin. Albemarle states that it will fully utilize its exploitation rights with the planned doubling of production. However, the company does not disclose the actual production level in its announcement.

Ganfeng is the third-largest lithium compound producer in the world and the leading producer in China. The company is unique because it covers a wide swath of the lithium-ion battery supply chain, including lithium resource development, refining & processing (75% of total revenue), battery manufacturing (17% of total revenue), and battery recycling & other (8% of total revenue). The company boasts long-term supply contracts with major battery producers and OEMs like Tesla, Panasonic, LG Chem, Volkswagen, Samsung, and, recently, BMW. Helped by the predictability of these contracts, Ganfeng expects to double its capacity from 100,000 metric tons in 2020 to 200,000 by 2025. Ganfeng is also focused on growing its lithium hydroxide production and sales. Lithium hydroxide is better suited than lithium carbonate for the next generation of EV battery technology. Batteries with NMC 811 cathodes and other nickel-rich batteries, require lithium hydroxide. By 2021, the company expects to produce and sell 50,000–60,000 metric tons of lithium hydroxide and 20,000–30,000 metric tons of lithium carbonate.

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Livent, which split out of FMC Corporation in 2018, is a Philadelphia-based company with a lithium history that dates back to the 1940s. Compared to the other large Western players, namely Albemarle and SQM, which own and operate some non-lithium businesses, Livent is a pure-play company focused only on lithium. Livent operates one of the lowest-cost lithium mineral deposits in the world, the Salar del Hombre Muerto in Argentina. The company’s operations sit at the low end of the global cost curve to produce lithium carbonate. Yet, the company’s strategy is to focus on lithium hydroxide. As such, it is important to note that brine-based raw materials like these require a two-step process to get to lithium hydroxide: a conversion into lithium carbonate first and then a conversion into lithium hydroxide. This extra step adds costs, but the all-in cost structure for lithium hydroxide, which we estimate to be about $5800, remains below today’s depressed lithium prices.

Conclusion

2020 has been a challenging year for everyone. However, we got to see glimpses of technology advancements of the near future, such as Tesla new 4680 battery. In 2020, five companies manufactured more than 80% of the world’s lithium batteries, whereas five companies supplied 70% of the total lithium supply!

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