Latest market news

IRA spurs Japanese, South Korean battery investment

  • Market: Battery materials
  • 10/05/23

The US' Inflation Reduction Act (IRA) has stirred up the insecurities that economies have about their critical minerals industries, spurring greater electric vehicle (EV) battery investments in northeast Asia this year.

The battery race began in 2022 but intensified this year, with the IRA producing a greater response from governments and the global lithium, battery and EV industries. They now risk being left in the lurch as the US tries everything in its power to create a more independent and secure supply chain.

The past two months has seen UK's lithium industry respond, Europe's battery industry expressing concern, South Korea acting swiftly to support its EV and battery industry and Japanese politically-influential auto manufacturer Toyota taking the lead to advance the country's EV and battery industry.

Expanded tax credits under the IRA, designed to grow domestic production of clean energy vehicles and the lithium-ion battery supply chain, have, to a certain extent, resulted in expanded South Korean and Japanese investments.

There is now seeing increased developments across the entire critical minerals supply chain, partly because of the impact of the IRA and its ripple effects.

South Korean battery manufacturer LG Energy Solutions is aligning its supply chains to try making batteries that qualify for the IRA's subsidies. It has partnered up with Chinese lithium producer Yahua to produce lithium hydroxide in Morocco, which is a signatory to free trade agreements with the US and EU. It is also raising its investment in its Arizona's manufacturing complex to $5.5bn, planning a $4.1bn joint venture lithium-ion battery factory in Canada's Ontario with European auto producer Stellantis. It is also working with US auto manufacturer General Motors (GM) to operate three joint-venture manufacturing plants in Ohio, Tennessee and Michigan for GM's Ultium battery.

South Korean battery material firms SK On and Ecopro Materials' joint venture with Chinese battery firm Green Eco-Manufacture is also building a 50,000 t/yr battery precursor plant in South Korea to meet the IRA's market entrance requirements.

South Korea's government in general reacted positively to the revised IRA rules published on 31 March, according to a Congressional Research Service report published in April.

But Japan is standing firm on building out domestic capacity and seeking to regain market power. This is despite the critical minerals agreement signed between Japan and the US in March, essentially addressing Japan's concerns on the critical mineral content requirements of the IRA.

The unveiling of Toyota's new EV plan on 7 April denotes that the government will have no choice but to gear up domestic battery production to facilitate the private sector.

"Toyota means politics in this country," a battery material trader told Argus.

Uncertainty, tensions linger

But sluggish GDP growth in South Korea and Japan, coupled with high borrowing costs with expectations of persistently high interest rates, may limit firms' appetite to further invest.

GDP growth in Asia is to be dominated by China and India in 2023, according to the IMF's regional economic outlook for Asia and Pacific, which expects the two countries to contribute around half of global growth this year.

The relatively unstable global investment climate because of rising trade fragmentation risks may also be an obstacle to Japanese and South Korean firms' long-term domestic and foreign investment commitments. The two countries, which share production links with the US and China, may suffer negative spillover in their exports to the US and China if US-China trade barriers in the form of tariffs intensify, according to an economic update by the World Bank in April.

The intensifying side effects of friendshoring, or manufacturing and sourcing from countries that are geopolitical allies, and a greater divergence from globalisation of supply chains have become much more noticeable. This is creating tensions between economies given the looming insecurities.

Outside of Asia the policy has created political-economic challenges between the US and EU. It may even "create a wedge between EU member states that can subsidise and those that lack fiscal resources and cannot", according to a working paper by Washington-based think tank the Peterson Institute for International Economics.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
30/12/24

Viewpoint: Policy uncertainty dogs battery anode plans

Viewpoint: Policy uncertainty dogs battery anode plans

Washington, 30 December (Argus) — Former president Donald Trump's re-election is sparking uncertainty in the US' synthetic graphite battery sector, with companies worried about a possible halt to government finance and a weaker outlook for domestic demand. "With Trump being elected president, everything's up in the air," one industry source said. Battery materials companies expecting to receive government funding to build plants in the US could see their prospects dim with Trump coming into office , since these companies need the federal grants to compete with China, a second source said. Trump on the campaign trail said he would rescind all unspent funds in President Joe Biden's Inflation Reduction Act (IRA) and scrap Environmental Protection Agency tailpipe standards, which he called an electric vehicle (EV) "mandate". The Biden administration is racing to try and secure projects set to be funded by the IRA. On 16 December, US battery materials producer Novonix received a conditional loan for up to $754mn for a new synthetic graphite plant from the US Department of Energy (DOE). If finalised, the loan would be used to build a new 31,500 t/yr synthetic graphite plant in Tennessee by the end of 2028. DOE previously awarded Novonix a $100mn grant and a $103mn tax credit to expand capacity at its Tennessee plant to 40,000 t/yr by 2025 and 150,000 t/yr by 2030. DOE on 16 December also closed on its up to $9.6bn loan to South Korean battery manufacturer SK On for the construction of three battery plants in the US, the largest loan ever awarded under its Advanced Technology Vehicles Manufacturing Program. DOE also in September selected SKI US , part of India-based Birla Carbon, to receive $150mn build a 25,000 t/yr synthetic graphite production plant in South Carolina. Some in Trump's orbit have warned they will review contracts they view as hastily pushed out before the former president takes office . But some Republicans are likely to oppose full repeal of the IRA, since the bill funds projects in their districts. And Republicans will hold a razor-thin majority in the House of Representatives. Even if Republicans do not repeal the IRA or other EV subsidies like tax credits, the uncertainty surrounding the new administration's support could be a stumbling block. "Who's going to put half a billion dollars into a battery plant right now when you don't have certainty on the push for EVs?" the first source said. Battery projects require huge amounts of investment. Swedish battery maker Northvolt obtained record venture capital investment for a European start-up at $15bn. But on 21 November, the company filed for Chapter 11 bankruptcy protection in the US , in part because of difficulties "bridging financing between different stakeholders", outgoing chief executive Peter Carlsson said. The company had already closed down its R&D facility in the US and put plans for factories in Canada, Germany and Sweden on hold. Its financial woes intensified after the Swedish government declined to invest. Other European governments have already reduced financial support for EVs, more for spending reasons than policy, which has softened demand in the region. France recently changed eligibility requirements for subsidies , and Germany ended its subsidy late last year. Some companies, like Norwegian battery materials company Vianode, have been planning multi-billion dollar investment programmes to expand their reach in the automotive industry throughout North America and Europe. It is not clear if Trump's election will have an effect on these plans. Vianode opened its first anode graphite production plant, Via One, in Herøya, Norway, in October. The plant will have a capacity of 2,000 t/yr, enough to supply 30,000 EVs annually, according to Vianode. Chinese firms have scaled up production of key battery materials at all stages of the supply chain, creating more competition for European and US producers. Chinese producers dominate the global EV market with about 70pc of market share, even as the EU and US have put policies in place to try to support their domestic industry. China's lithium-ion battery exports to the US jumped in November as suppliers looked to get ahead of potential new tariffs. The Trump administration is likely to increase tariffs on Chinese lithium-ion batteries to as much as 60pc in the coming few months after Biden earlier this year lifted them to 25pc from 7.5pc. This could help support US-based battery plants. But tariffs on Chinese goods could also present additional challenges, as the raw materials for synthetic graphite often have some Chinese components. Needle coke, traditionally the main raw material for synthetic graphite used in battery anodes, is not widely produced outside of China. And while companies in China have been researching options for using a wider range of petroleum coke qualities , specifications are still relatively narrow, with battery companies in China absorbing most of the world's suitable coke . One graphite anode plant in Europe has been struggling to procure petroleum coke, according to a market participant. Sourcing coke for synthetic graphite in Europe and other ex-China locations is likely challenging, as most of these refineries and calciners have tied up their supply in long-term commitments, one producer said. Refineries are also reducing coke production, as the required feedstocks have become more costly. By Lauren Masterson and Hadley Medlock Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

Singapore extends electric vehicle incentive to 2027


30/12/24
News
30/12/24

Singapore extends electric vehicle incentive to 2027

Singapore, 30 December (Argus) — Singapore has extended the incentive for electric light commercial vehicles under its Commercial Vehicle Emissions Scheme (CVES) to 31 March 2027 from 1 April 2025. Incentives for more pollutive vehicles will also be scrapped or their surcharges raised, under the CVES. This is part of efforts to push for the adoption of cleaner commercial vehicles. The country's CVES categorises vehicles based on their "worst-performing pollutant". The S$15,000 ($11,060) CVES incentive for Band A, which includes mainly electric vehicles, has been kept unchanged at S$15,000, according to a joint statement by the city state's Land Transport Authority (LTA) and National Environment Agency (NEA). The S$5,000 incentive for Band B, which includes mainly petrol vehicles, will be scrapped, while the surcharge for Band C, which includes mainly diesel vehicles, will be raised from S$15,000 to S$20,000. "These changes are in line with the government's vision to have all vehicles run on cleaner energy by 2040," the LTA and NEA said in their joint statement on 30 December. Singapore will be halting new registrations for diesel cars and taxis from 2025, it said in July. Existing diesel cars will also be subject to higher road taxes. The country's Early Turnover Scheme (ETS) for heavy commercial vehicles, which promotes the replacement of older, more pollutive diesel commercial vehicles and buses by providing a discount when switching to cleaner-energy vehicles, will be extended to 31 December 2025. There were 11,941 battery electric cars in Singapore as of end-2023, which constituted just 1.8pc of its 2023 car population of around 651,300 units. The figure for petrol-electric hybrid cars, excluding plug-in vehicles, was much higher at 79,256 as of the end of 2023. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Japan carmakers Honda, Nissan start formal merger talks


23/12/24
News
23/12/24

Japan carmakers Honda, Nissan start formal merger talks

Tokyo, 23 December (Argus) — Japanese automakers Honda and Nissan said today they have officially started merger talks and are aiming to close a deal by June 2025. Fellow Japanese carmaker Mitsubishi is also considering joining the transaction. Honda and Nissan have signed an initial agreement to discuss a merger, including by setting up a joint holding company under which the current brands would operate as subsidiaries. Honda will appoint a majority of the holding company's board members including its president or representative director, Honda's president Toshihiro Mibe said on 23 December. Mitsubishi will make a final decision on whether to participate in the negotiations before the end of January 2025. A Honda representative told Argus on 18 December that the firm was exploring a possible merger with Nissan. Collaboration on the electrification of automobiles is one of the major reasons for the merger, according to Honda and Nissan. The firms agreed a strategic partnership in March to work together on electrification, studying possible areas of co-operation in developing automotive software platforms, core components relating to electric vehicles (EVs) and complementary products. Honda aims to electrify all its new cars by 2040 and is investing ¥10 trillion ($64bn) by 2030 partly to reduce battery costs, which account for around 30-40pc of the total cost of producing EVs, Mibe said in May. Honda's combined sales of EVs and fuel cell EVs (FCEVs) more than doubled to around 42,000 units in 2023, according to the company. But this only accounts for around 1pc of its total sales. Further investments on electrification by a single manufacturer are not feasible, Mibe said on 23 December. Nissan produced 3.4mn vehicles in 2023. It does not provide a precise breakdown for global EV sales, although it said in August 2023 that such sales had surpassed 1mn units since its first delivery in 2010. This is dwarfed by foreign EV competitors, including Chinese producer BYD and US manufacturer Tesla, whose sales exceeded 3mn and 1.8mn units respectively in 2023 alone. The merger is also designed to optimise facilities owned by Honda and Nissan, Mibe said. But he denied that it would lead to a reduction in production capacity or asset cuts. The companies instead aim to expand output, Mibe added, although he did not disclose a detailed plan. Nissan is struggling to make a profit, partly because of weak EV demand. The company's net profit slumped by 94pc on the year to ¥19.2bn in April-September, prompting it to cut global production capacity, including for EVs, by 20pc to around 4mn units/yr. Nissan's financial struggles will not affect its collaboration with Honda, but it needs to accelerate its financial recovery, Nissan chief executive Makoto Uchida said on 7 November. But Mibe suggested on 23 December that Nissan's financial situation could cause the proposed merger to be scrapped. Japan's trade and industry ministry (Meti) has yet to make any official comment on the merger talks. But Meti minister Yoji Muto said on 20 December that restructuring the industry would generally help increase the value of private entity and promote innovation. By Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Viewpoint: Europe’s EV future rests on Chinese FDI


19/12/24
News
19/12/24

Viewpoint: Europe’s EV future rests on Chinese FDI

London, 19 December (Argus) — The troubled buildout of Europe's EV supply chain, illustrated by the fall of Northvolt last month, suggests that the future now depends on foreign direct investment (FDI) — particularly from China. While EV sales in China rose by 46pc last month , they edged down by 2.48pc in Europe, and an increasing share is made up of Chinese-branded battery EVs , as western carmakers struggle to offer affordable models. China is now forecast to majority-own 300GWh of Europe's 1.3TWh battery capacity by 2030 ( see graph ). A shortage of skilled labour, fierce competition weighing on prices for feedstock materials and limited state investment — just some of the problems that befell Northvolt — suggest that Chinese FDI might need to increase further for Europe to expand its EV fleets. First, FDI into Europe that localises production of EVs that will eventually be sold to European consumers offers jobs to workers and affords Europe a portion of the value added. It offers a chance for technological ‘spillovers' — expertise on how to build and operate Chinese battery machinery in exchange for access to the largest EV market after China. Europe could also attract Chinese FDI under 50:50 joint ventures (JVs) between Chinese battery makers and domestic carmakers — such as CATL and Stellantis — in order to retain some equity and ensure an integration of local and foreign talent. It is how China developed its own internal combustion engine (Ice) industry, signing JVs with Volkswagen in 1984, Stellantis in 1992, General Motors in 1997 and Toyota in 2000, among others. It is also not clear to what extent China is comfortable with spillovers in exchange for market access. One criticism is that Chinese FDI might focus on EV assembly, although data from consultancy Rhodium Group show not only China's FDI into battery plants but that this has provided anchoring for FDI upstream into cathode and anode plants in Hungary, Sweden and Finland. Asian firms tend to hire talent from their home countries for senior positions without "skills trickling down to the local population", according to clean energy researcher Transport & Environment. Chinese firms could continue to make batteries in China, withholding the expertise that eluded Northvolt, before shipping parts for assembly in Europe. One condition could require a portion of FDI allocated to R&D, involving universities or local think-tanks. "R&D activities are usually not typical features of (Chinese) investments in the V4 [Visegrad] region, as investors usually bring only assembly," economist Agnes Szunomar said in a report on Chinese investments into the V4 in January, although Volvo and Nio have made plans in eastern Europe, Szunomar added. As it has increased, Chinese FDI — both state and private — has also shifted almost entirely away from mergers and acquisitions towards ‘greenfield' investments ( see graph ), i.e. businesses from scratch, suggesting a growing skills imbalance between the regions. European policy must change Europe is not the only target for Chinese EV-related FDI, and might have to increase its incentives if it is to build out homegrown industry. In a "carrot and stick" approach, endorsed by InoBat chairman Andy Palmer, the efficacy of the EU's much-deliberated tariffs as a ‘stick' appears uncertain so far. Analysis from Rhodium Group suggests that the EU's tariffs have disproportionately penalised western-branded EVs made in China and sold in Europe. They have also been too weak to entirely force China's EV production into Europe and yet strong enough to raise investor uncertainty, which could include further hikes on EVs or new tariffs on battery materials, for instance, which would scupper China's plans for FDI in battery assembly. Out of 11 EV plants that China is reported to have considered, just three in Europe have been confirmed ( see graph ) — the lowest share globally of China's investments. Meanwhile, tax breaks, grants and interest-free loans might fulfil the ‘carrot' in the EU's approach, as Hungary has illustrated, with state support for multiple projects, ranging from €2.4mn to €900mn for CATL's $7.3bn battery plant announced in August 2022 — set to create 9,000 jobs — and consequently 61pc of Chinese FDI into Europe last year, according to analysis from Rhodium Group ( see graph ). By Chris Welch Europe gigafactory forecast 2030 GWh Overall Chinese FDI into Europe, by conduit $bn Status of Chinese EV plants by region since 2022 Newly announced Chinese EV-related FDI by host region $bn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Syrah declares Mozambique graphite plant force majeure


12/12/24
News
12/12/24

Syrah declares Mozambique graphite plant force majeure

Singapore, 12 December (Argus) — Sydney-based graphite producer Syrah Resources has declared a force majeure for its Balama operations in Mozambique and defaulted on US government-backed debt, given post-election civil unrest in Mozambique. This came as Syrah is unable to carry out production at Balama throughout October-December to replenish inventory and to sell to customers, because of a protest that had began at the site in late September, forcing a force majeure event. Syrah back in October said the protest is disrupting site access and causing production uncertainty. The firm is one of the few established non-Chinese graphite producers. The protest was originally linked to farmers with "historical farmland resettlement grievances", Syrah said. But it has persisted and worsened after Mozambique's general election in October, which triggered violent protests across the country's major cities given claims of electoral fraud. "The protest actions have been peaceful with no evident actions to deliberately damage property, plant or equipment at Balama," said Syrah. But efforts to reach a positive resolution have been "unsuccessful to date", it added. Syrah is still working on restoring operations "as quick as possible" but has acknowledged that any resolution will be a lengthy process. The Balama site has not been producing graphite since July, according to Syrah, owing to sufficient inventory for sales and low graphite fines demand. Balama produced around 24,000t of natural graphite during the April-June quarter. Syrah has been operating Balama in short "campaign" stints this year owing to insufficient market demand at times. The protest also triggered events of default on its loans with the US International Development Finance (DFC) and the US Department of Energy (DOE), given the "impacts and duration" of the protest. The US DFC pledged its first loan to a graphite operation to Syrah, which amounted to $150mn. Syrah also received a $102mn loan facility with US DOE for the expansion of its Syrah Vidalia anode active material facility in US. Syrah is engaging with US DFC and DOE on its defaults, it said.Australian mining company South32 earlier this month withdrew the production guidance for its Mozal Aluminium smelter in Mozambique because of riots and road blockages. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more