“There is growing nationalism and regionalism [and] coronavirus has been a wake-up call for how dependent industries are on China,” Emily Hersh, managing partner of DCDB Group said during the event.
The production of battery cells and precursor materials is highly concentrated in China, Japan and Korea, meaning automakers are dependent on Asia for critical supplies to their EV fleets, which leaves them vulnerable to interruptions if regional lockdowns or logistical issues, such as those during the Covid-19 pandemic, occur again, Fastmarkets understands.
The increasing uptake of EVs will feed back into the supply chain and encourage further investment in battery production hubs outside China, with Europe, especially, set to grow in importance, panelists said.
Chemicals companies such as BASF, Johnson Matthey and Umicore are undertaking investment in their European operations that will solidify Europe’s position, Daniel Jimenez, managing partner at iLiMarkets said.
“[Those investments] could make it a lot easier for a lithium chemical industry to develop in Europe. It could be that Europe relies less on China, or is China free in its supply chain,” Jimenez said.
“Long supply chains are a problem for any industry. Europe may have been slow but they’re making up for lost time. It’s happening and could gain momentum very fast,” Will Adams, Fastmarkets’ head of battery raw materials research, added.
A low-carbon future
Furthermore, the drive toward a green economy that supports the investment in and adoption of EVs is complementary to the shortening of supply chains and investment in regional hubs, webinar attendees heard.
“A shorter supply chain is less carbon intensive so I think carbon emissions pressures will further enhance the desire for a local cluster. There will be pressure for suppliers to say where their product comes from and how it got there,” Hersh said.
Investment in lithium and battery-cathode supply in the United States is some way behind investment in Europe, but not off the cards, delegates heard.
“Supply chains are complicated: first you have to have demand and then pull the supply chain in piece by piece,” Hersh said.
“US lithium supply makes sense when there is a US-based cathode production industry, which is not there yet - it needs to flow back from downstream,” Jimenez said.
Furthermore, low lithium prices and ample stocks are discouraging upstream investment
but could be paving the way for lithium shortage after 2025, webinar attendees heard.
Fastmarkets’ price assessment for lithium hydroxide monohydrate 56.5% LiOH.H2O min, battery grade, spot price cif China, Japan & Korea
stands at $9-10.50 per kg as of June 25, its lowest level since its launch in late 2017.
“We’ll get supply from the US in time and it comes down to shorter supply chains, but the investment money isn’t really attracted to the industry just yet,” Adams added.