IRA spurs Japanese, South Korean battery investment

: Battery materials
23/05/10

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.

By Joseph Ho

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24/12/19

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.

Syrah declares Mozambique graphite plant force majeure

24/12/12

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.

Japan’s domestic EV sales extend fall in November

24/12/06

Japan’s domestic EV sales extend fall in November

Tokyo, 6 December (Argus) — Japanese domestic sales of passenger electric vehicles (EVs) fell for a 13th straight month in November, mostly because of lower demand for domestic brand EVs. Sales totalled 5,041 units in November, down by 22pc from a year earlier, according to data from three industry groups — the Automobile Dealers Association, the Japan Light Motor Vehicle and Motorcycle Association and the Japan Automobile Importers Association (JAIA). Sales were up by 17pc on the month. EVs accounted for 1.5pc of Japan's total domestic car passenger sales in November, down by 0.4 percentage points from a year earlier. The fall in EV sales was mostly attributed to lower sales of Nissan's Sakura, one of the domestic producer's top selling EV models. Sakura sales fell sharply by 37pc on the year to 1,731 units. Sales of foreign brand passenger EVs were stable on the year at 2,184 units. Reduced deliveries from German manufacturer Volkswagen continued to weigh on supply , but new EV models from German producer BMW and Mercedes lifted demand for imported EVs, a representative from the JAIA told Argus . Foreign EV sales are likely to increase on the month in December, as the last month of the year typically records higher sales compared to other months, the JAIA representative added. Imported EVs accounted for 43pc of the country's total passenger EV sales in November. By Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

S Korea wary of battery risk from US-Canada tariff row

24/12/05

S Korea wary of battery risk from US-Canada tariff row

Singapore, 5 December (Argus) — South Korea's battery and mineral investments in Canada are expected to take a hit from US president-elect Donald Trump's proposed 25pc tariff on all Canadian imports, South Korea's trade and industry ministry Motie warned today. Trump's threat serves as a precedent for future global tariff measures from the US, according to Motie, citing its trade minister Cheong In-kyo, who held a roundtable on the tariff threat today. South Korean firms have been investing in Canada as it serves as a base to enter the North American electric vehicle (EV) and battery market, but companies that did so are expected to be "significantly affected" by the potential tariff, according to Motie. Any development in the tariff threat is being closely monitored to inform the South Korean government of potential future trade risks, according to Cheong, who added that South Korea will work closely with the Canadian government to "minimise" the "uncertainties" posed. Top South Korean battery maker LG Energy Solution (LGES) and South Korean battery materials producer Posco Future M — a subsidiary of conglomerate Posco — are some of the companies that have bet on Canada. LGES' joint venture with global automaker Stellantis, which is the first large-scale EV battery manufacturing facility in the country with a production capacity of 49.5GWh, began its battery module production in October, with cell manufacturing to commence in 2025. LGES in 2022 also signed agreements with Canadian firms Electra, Avalon and Snow Lake for lithium hydroxide and cobalt supply. Electra's agreement was later expanded and is supposed to supply LGES 19,000 t/yr of "battery-grade cobalt" for five years starting from 2025, according to Electra. Electra secured a $20mn prepayment facility in September to help plug a $60mn gap in capital that it needs to finish its $250mn refinery in Ontario. But Posco Future M earlier this year, citing "local conditions", delayed the completion of its 30,000 t/yr high-nickel cathode active material plant in Quebec, which is a joint venture with US automaker General Motors. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Thailand to extend BEV production commitment deadline

24/12/04

Thailand to extend BEV production commitment deadline

Singapore, 4 December (Argus) — Thailand's National Electric Vehicle Policy Board has approved an extension for battery electric vehicle (BEV) producers, which were supposed to fulfil their production commitment this year, according to the country's Board of Investment (BOI). BEV manufacturers received subsidies under the country's first phase of EV promotion measures — also called the EV 3.0 measures — and were supposed to produce one BEV this year for every vehicle they imported between 2022-23. The ratio will rise to 1½ BEV in 2025 for every imported vehicle. The unfulfilled portion of the production commitment will now roll over and manufacturers are required to instead follow the conditions under its second phase of EV promotion measures , the EV 3.5 measures. The portion that was not completed will not receive subsidies under either package, said BOI on 4 December. Subsidies under the EV 3.5 measures will "come into force" after those production commitments have been fulfilled. About 26 car manufacturers have applied to the incentive schemes, according to BOI. Thailand's Federation of Thai Industries (FTI) cut the country's 2024 auto output estimation twice this year. The estimation was cut from 1.9mn units to 1.7mn units in July, and once more to 1.5mn units in November. Thailand's total vehicle output in January-October came in at nearly 1.25mn units, down by 19pc compared to the same period a year earlier, according to FTI. October's vehicle output fell by 25pc on the year to 118,800 units, domestic sales dropped by 36pc to about 37,700 units and exports were down by 20pc to around 84,300 units. The country has produced 8,026 units of battery passenger cars, 159,176 units of hybrid passenger cars and 5,067 units of plug-in hybrid passenger cars over January-October, according to FTI. Cumulative registrations of battery passenger cars reached 213,173 units as of end-October, while that of hybrid passenger cars reached 455,364 units. The National Electric Vehicle Policy Board in July approved a temporary reduction of excise tax rate for hybrid EVs from 2028-32 on the conditions of car manufacturers investing in Thailand and adhering to strict vehicle CO2 emission requirements, which it said is expected to bring in around 50bn baht ($1.4bn) of new investments. Excise tax rates of between 6-9pc were set depending on HEVs' CO2 emission requirements. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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