LG Chem looks to China and e-bikes to counter its shrinking Li-ion market share

Powin Energy makes stationary energy storage systems for commercial and industrial (C&I) customers and utilities; its modular stacks are rated at two, three, or four hours with an average energy capacity of 742 kWh and use a lithium iron phosphate (LFP) battery chemistry The company's main differentiator is its advanced battery operating system (OS) that logs and analyzes detailed battery information, based on granular voltage, current, temperature, and timestamp information It sources batteries from CATL and Eve; Powin acts as a complete system integrator and controls battery sourcing, module and rack integration, technology development, and deployment To date, Powin Energy has raised USD 127.6 million from investors; in 2021, it raised a USD 100 million equity round led by Trilantic Capital Management and Energy Impact Partners Clients interested in advanced analytics for battery systems should investigate Powin's offering for possible partnership or supply agreements; the company's system design, if built from the battery cell up, differentiates it from other major system integrators

In the past year, battery manufacturers have continued to announce hefty capacity expansions, often with associated automakers or in regions with anticipated battery electric vehicle growth. Despite supply crunches as a result of COVID-19 and battery demand outpacing production, the largest global cell producers have made ambitious goals to have hundreds of GWh worth of production capacity by 2026. Outside of the top manufacturers, new companies have cropped up with their own announcements for factories in the tens of GWh. With so many expansion announcements, which producers aim for the biggest capacity by 2026? Will newer entrants have an impact on global Li-ion battery manufacturing? We compiled a list of current battery manufacturers and their announced capacities for large-format cells (i.e., those used in transportation and stationary storage applications), along with expansion targets gathered through primary and secondary research. Data were collected over the following four years, which we considered a reasonably near-term timeline that eliminates more ambitious long-term goals. Historically, Lux has observed that many of these capacity goals do not reflect delivery volumes for a given timeline, but they do provide insight into each manufacturer's growth. Below, we compare current and future capacities of the projected top 15 Li-ion battery manufacturers in 2022, and the stacked area plots show where this expansion will take place, depending on factory location. Of the 30 manufacturers Lux tracked, companies announced a combined 4 TWh of manufacturing capacity by 2026. Unsurprisingly, CATL leads in expansion targets, targeting 600 GWh by 2025. However, since our last update on manufacturing capacities, Svolt and CALB swooped in with their own capacity goals of 600 GWh and 500 GWh, respectively. Surprisingly, LG Energy Solution's capacity in 2022 is expected to be on par with CATL, primarily due to its focus on expansion in Europe, with 70 GWh in Poland. Meanwhile, most battery production will continue to center in China, though expansion of Chinese manufacturers into other regions could dilute that dominance. In particular, CATL announced a 600-GWh goal by 2025, with most of it assumed to be in China, but given its recent presence in Germany, there could be some split of that 600 GWh into more distributed locations. Over the past year, appetite for Li-ion batteries has enabled previously unknown companies to establish ambitious production plans. In 2021, 24M licensed its technology to multiple manufacturing facilities. Its licensing began with Freyr’s announcement in December 2020 for a 40-GWh plant in Norway. Then in October 2021, Freyr and Koch Strategic Platforms formed a joint venture (JV) to build 50 GWh of battery production in the U.S. using 24M’s technology. Freyr — along with other manufacturers like Britishvolt, Morrow, and Kore Power — represents an emerging cohort of cell producers that have access to capital to build out manufacturing without possessing its own technology. In the past, Lux has been critical of unestablished Li-ion battery producers, but the battery industry has a lower barrier to entry due to increasing commoditization of batteries and the growth of secondary markets like energy storage; junior producers might have an undifferentiated product, but will ultimately find some success given enough funding to start production. Given the pervasive supply constraints in the Li-ion battery industry, cell manufacturers have rightfully signed significant agreements for materials. Ultium Cells, the JV between LG Energy Solution and GM, formed a JV with POSCO Chemical to produce cathode material in North America. POSCO subsequently announced an investment of USD 830 million in a lithium plant in Argentina. Starting later in 2022, LG Energy Solution will receive 60,000 tonne/a of lithium hydroxide from Sigma Lithium. This supply agreement is notable because pricing is not set in the contract but will depend on market prices, indicating that security of supply is prioritized over cost. In 2021, CATL penned a deal with China Molybdenum to acquire a portion of rights to a copper-cobalt mine in the Democratic Republic of Congo. Later that same year, CATL lost out on acquiring Millenial Lithium for USD 300 million, though the company still holds interest in other lithium companies. The listed announcements are just a small portion of supply deals that are now required if a cell manufacturer hopes to achieve substantial production in the future. Many of the top players are looking up the value chain to materials supply, and that will be a deciding factor in which companies meet their 2026 goals and which fall short. Looking toward the future of Li-ion battery manufacturing, the landscape of top producers is unlikely to majorly shift. Governments in Europe and North America are building more momentum to encourage domestic production, and those efforts are slowly showing results. Clients should expect to see more global distribution of manufacturing sites, but the market will always comprise a large portion of producers in China with deep pockets and ties to stable materials supplies.

In the past couple of years, lithium iron phosphate (LFP) cathodes have made a reappearance in the Li-ion battery industry for light-duty EVs. The chemistry was previously dismissed as unsuitable for most mobility applications due to its low energy and power densities, lower voltage operation, and low conductivity; however, recent innovations in packing efficiencies, cell-to-pack technology, and a growing awareness of LFP's robustness and safety have led to wider adoption. Additionally, China phased out its subsidy program that incentivized the production of higher energy-dense chemistries. In the first half of 2021, LFP shot up to nearly 14% market share in mobility applications. Later in 2021, Tesla's high-profile switch to LFP in its standard range vehicles provided proof that technology improvements across the cell and pack can make LFP competitive with other cathode chemistries. With rising battery materials prices, LFP is only expected to grow, offering not just cost savings, but more material security over chemistries that use nickel and cobalt. Barring significant breakthroughs in high-voltage chemistries like lithium manganese nickel oxide, the Li-ion cathode market will continue to see a bifurcation between high-nickel chemistries — nickel cobalt aluminium and nickel manganese cobalt — and LFP, with the role of LFP growing significantly across applications. Despite the rapid growth of LFP, production of the cathode material and cells using it has largely stayed within China. Certainly, the country's general dominance in the Li-ion industry is part of its disproportionate share of LFP production, but the crux of limited global LFP production is mainly due to IP restrictions. The exclusive ownership of crucial LFP patents by a small group of players resulted in control over production over the past two deades, but the last of those foundational patents expires April 2022. So what exactly is the importance of LFP IP ownership, and what does that mean for the future of Li-ion cathodes? History of LFP IP In 1999, John B. Goodenough at the University of Texas at Austin filed the first patent on LFP (US5910382A) that outlined the chemical composition of the cathode material. In 2002, the Université de Montréal and the French National Centre for Scientific Research (CNRS) applied for a patent that coated LFP crystals in carbon to create a conductive material (US6855273B2). Another patent that included Hydro-Québec subsequently described the synthesis method for producing carbon-coated LFP (US7285260B2). In 2011, the Université de Montréal, Hydro-Quèbec, Süd-Chemie, and CNRS formed a consortium for the licensing of LFP IP named LiFePO4+C Licensing AG. Later that same year, A123 Systems settled with LiFePO4+C after a dispute over LFP patents, winning a licensing agreement. Over the lifetime of the patents, LiFePO4+C granted licenses to BASF, Aleees, A123 Systems, Sumitomo, Mitsui Engineering & Shipbuilding (MES), Tatung Fine Chemicals, and Sony. Despite the strong IP protection, enforcement in China remained difficult. As a result, LiFePO4+C granted blanket LFP usage in China on the condition that cells were not exported. State of LFP development In the last 10 years, the top companies working on LFP include LG Chem, A123 Systems, BYD, Umicore, Denka, MES, and Gotion. Most patents filed on LFP describe new carbon conductive coatings, new cathode synthesis methods for higher specific capacity and rate capability, and adjustable material properties like specifying particle size or including dopants. Outside of the listed top patent filers, major LFP cathode suppliers like Dynanonic, BTR, and CATL have the most activity. China's freedom with LFP production has resulted in companies like BYD and Gotion further patenting specific module and packing designs to optimize performance. Global patent filings show that China has a clear head start in LFP development, climbing up to 87% of filings in 2021. In the past year, existing LFP producers have already made plans to expand. Norwegian battery producer Freyr and Aleees signed an agreement for LFP production by Aleees near Freyr’s anticipated Norway production facility. Additionally, Gotion announced last year it signed a long-term supply deal to a large U.S. automaker for LFP cells. Production would start initially in China, and then they would explore U.S. production for a minimum of 200 GWh over five years starting in 2023. Impact on global Li-ion battery production The expiration of LiFePO4+C's patents is a net positive for the Li-ion battery industry. Building concerns over nickel and cobalt supply and high lithium prices have sparked interest in LFP, but licensing IP to produce the material was historically uneconomical. Going forward, developers will be able to freely bring LFP materials innovation to commercialization and improve LFP performance. Despite the wide opportunity for battery makers across the globe, Chinese battery manufacturers with existing LFP production capacity will benefit from the patent expirations first. In the short term, markets outside of China — specifically in North America and Europe where demand for Li-ion batteries is outpacing supply — will see an uptick in battery imports from China. With existing large-scale LFP cathode production and cell manufacturing, Chinese battery makers will be even more incentivized to target international battery markets while also being able to offer lower prices. Countries that are building up domestic battery strategies will likely also target LFP cathode production locally. However in the midterm, as this capacity is built out, LFP cathode producers in China will benefit. Even for experienced cathode producers, introducing a new chemistry will take time. It will require customer validation and supply agreements. Outside of China, the cathode producers that had previously licensed from LiFePO4+C will also see benefit from renewed interest in LFP. Clients should expect to see battery makers prioritize cathode chemistry diversity, especially as LFP has already seen market acceptance for electric vehicle applications in China. Strategic cell manufacturers must necessarily offer different Li-ion battery products. Materials supply constraints can be partially solved through long-term offtake agreements, but cathode chemistry diversity offers another safety net for manufacturers.