With the push towards clear vitality and elevated demand for electrical automobiles, producers want batteries — particularly lithium-ion batteries — greater than ever. Examples of the accelerating transition to battery powered automobiles are all over the place: the US Postal Service introduced a minimum of 40% of its Subsequent Era Supply Autos and different business automobiles might be electrical automobiles, Amazon has begun utilizing Rivian supply vans in over a dozen cities, and Walmart executed an settlement to bought 4,500 electrical supply vans. With every of those conversions, the pressure on the provision chain for batteries intensifies. This text will present an summary of the lithium-ion battery business and the present provide chain points affecting the manufacturing and future of those batteries.
I. Lithium-Ion Battery Overview
The lithium-ion battery business depends closely on the mining of uncooked supplies and manufacturing of the batteries—each of that are susceptible to provide chain interference.
Lithium-ion batteries are primarily comprised of 4 key parts: a cathode, anode, separator, and electrolyte, as proven in Determine 1. At a excessive stage, the cathode (the part that produces lithium ions) consists of lithium oxide.1 The anode (the part that shops the lithium ions) is mostly comprised of graphite. The electrolyte is a medium that enables the free motion of the lithium ions that’s composed of salts, solvents, and components. Lastly, the separator is absolutely the barrier between the cathode and anode.
The cathode is the essential part related to this text as a result of that is the place provide chain points are almost certainly to come up. The composition of the cathode relies upon closely on the applying of the battery.2
| Utility | Required Parts |
|
Cell Telephones Cameras Laptops |
Cobalt and Lithium |
|
Energy Instruments Medical Gear |
Manganese and Lithium or Nickel-Cobalt-Manganese and Lithium or Phosphate and Lithium |
Given the prevalence and continued demand for brand spanking new cell telephones, cameras, and computer systems, cobalt and lithium are probably the most invaluable uncooked supplies within the manufacturing of lithium-ion batteries and are already dealing with provide chain interruptions at present.
There are three essential phases within the manufacturing of lithium-ion batteries: (1) mining for uncooked supplies, (2) refining the uncooked supplies, and (3) producing and manufacturing the batteries themselves. At every of those phases, there are provide chain points that needs to be addressed throughout contractual negotiations quite than ready for the problems to come up throughout the course of manufacturing.
II. Provide Chain Points inside the Battery Trade
A. Manufacturing
China presently dominates the worldwide lithium-ion battery provide chain, producing 79% of all lithium-ion batteries that entered the worldwide market in 2021.3 The nation additional controls 61% of worldwide lithium refining for battery storage and electrical automobiles4 and 100% of the processing of pure graphite used for battery anodes.5 China’s dominant place within the lithium-ion battery business and related uncommon earth components is trigger for concern each to corporations and governments.
COVID-19, the warfare in Ukraine, and inevitable geopolitical unrest will proceed to have an effect on international provide chains. Identical to some other business, the vitality sector has been and can proceed to be impacted by these elements. Cobalt, lithium, and nickel—essential supplies within the manufacturing of batteries—are uncovered to provide chain dangers as a result of manufacturing and processing are geographically concentrated and dominated by jurisdictions which have been alleged to violate labor and human rights. For added data, see our article on Managing Provide Chain Disruption in an Period of Geopolitical Threat.
Argentina can also be on the forefront of the worldwide scramble for lithium because it presently accounts for 21% of the world’s reserves with solely two mines in operation.6 Just like China, Argentina wields important energy within the mining of uncooked supplies and plans to broaden its affect additional within the lithium provide chain, with 13 deliberate mines and probably dozens extra within the works.
European international locations are additionally growing their manufacturing, with the European Union poised to grow to be the second largest producer of lithium-ion batteries on the earth by 2025 with 11% of the worldwide manufacturing capability.7
Regardless of latest efforts,8 the US doesn’t have a big presence within the mining or refining of uncommon earth metals. Due to this, the US closely depends on overseas sources to supply lithium-ion batteries. In June 2021, the U.S. Division of Vitality (DOE) revealed a evaluate of the large-capacity battery provide chain and advisable establishing home manufacturing and processing capabilities for essential supplies to help a totally home battery provide chain.9 The DOE decided that a number of vitality applied sciences are extremely depending on insecure and unstable overseas sources—necessitating home development of the battery business.10 In response, the DOE issued two notices of intent in February 2022 to supply $2.91 billion to spice up U.S. manufacturing of lithium-ion batteries which are essential to rising the vitality sector.11 The DOE intends to fund refining and manufacturing vegetation for battery supplies, recycling services, and different manufacturing services.
New expertise may even change the panorama of lithium-ion battery manufacturing. Lilac Options, a California-based startup firm, presents expertise that may get better12 as much as twice as a lot lithium as conventional strategies.13 Equally, Princeton NuEnergy is one other startup that has developed a cheap, sustainable technique to make new batteries from outdated ones.14 Though this sort of new expertise will ease the provision chain bottleneck, it doesn’t change the truth that lithium-ion battery manufacturing closely depends on uncooked supply materials availability. The underside line stays that the world’s current lithium manufacturing is concentrated in Chile, Australia, Argentina, and China.15 As indicated in Determine 2 under, the reliance on foreign-sourced supplies is more likely to proceed for the following few years till additional improvement of battery expertise that doesn’t depend on uncommon earth metals.
Determine 2: Future Lithium Manufacturing Sources
B. Worth
In a separate article, Foley’s Lauren Loew mentioned how the worth surge of lithium displays elevated battery calls for, with the price rising greater than 900% since 2021.16 These value surges proceed as inflation stays at an all-time excessive. The rising prices of lithium-ion batteries, coupled with inflation, have already resulted in will increase within the costs for electrical automobiles. For added data on the impression of inflation on the provision chain, see our article Inflation Woes: 4 Key Methods for Corporations to Handle Inflation within the Provide Chain.
Choice makers will need to concentrate on the impression of inflation on their contracts involving lithium-ion batteries. “In well-established vitality storage markets, just like the U.S., greater prices have resulted in some builders seeking to renegotiate contract costs with offtakers. These renegotiations can take time and delay venture commissioning.” says Helen Kou, an vitality storage affiliate on the analysis firm BloombergNEF.17
C. Transportation/Flammability
Lithium-ion batteries are regulated as a hazardous materials beneath the U.S. Division of Transportation’s (DOT) Hazardous Supplies Rules by the U.S. Division of Transportation Pipeline and Hazardous Supplies Security Administration (PHMSA). Not like commonplace batteries, most lithium-ion batteries include flammable supplies and have an extremely excessive vitality density. In consequence, the lithium-ion batteries can overheat and ignite beneath sure circumstances, akin to a brief circuit, bodily injury, improper design, or meeting. As soon as ignited, lithium cell and battery fires may be tough to extinguish.18 In consequence, corporations want to concentrate on the potential dangers and consider the correct precautions when engaged in transactions involving lithium-ion batteries.
Up to now, there is no such thing as a conclusive analysis to find out if electrical automobiles are extra vulnerable to spontaneous fires in comparison with conventional automobiles.19 Analysis reveals that electrical automobiles solely have a 0.03% probability of igniting, in comparison with conventional combustion engines at 1.5% probability of igniting.20 Hybrid automobiles—which have a excessive voltage battery and an inner combustion engine—have the best chance of a car fireplace at 3.4%.21
On February 16, 2022, a cargo ship carrying almost 4,000 automobiles from Germany to the US caught fireplace within the Atlantic Ocean.22 Almost two weeks later, the cargo ship sank in the course of the Atlantic. Though there is no such thing as a official assertion as to the breakdown of conventional and electrical automobiles on board, the lithium-ion battery automobiles would have made the fires more durable to extinguish.
III. Conclusion
Because the world strikes towards cleaner vitality, questions and points involving the provision chain will develop. These questions needs to be addressed as quickly as potential earlier than executing any contract. In the event you or your organization are concerned in transactions the place lithium-ion batteries are a cloth part, there are important provide chain hurdles that needs to be addressed early on throughout negotiations relating to the sourcing of uncooked supplies and pricing points. In gentle of the restricted availability of uncooked supplies and the complexities concerned in creating lithium mines, corporations must look to different avenues for acquiring lithium and different essential parts. Corporations counting on lithium-ion batteries ought to consider and put money into expertise that’s economically viable and maximizes the viability and recyclability of those batteries to keep away from supply-chain points. Alternatively, corporations can enter into multi-year agreements for lithium. Nevertheless, given the heavy reliance on uncommon earth metals to supply lithium-ion batteries, corporations must closely contemplate the sourcing of the metals and different points which will have an effect on mining and refining, akin to geopolitical points. When you’ve got any questions on points regarding provide chain points, please contact our crew at Foley & Lardner.
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12 Restoration is the method by which lithium, cobalt, nickel, and manganese may be retrieved from batteries that not have a helpful life. After these metals are recovered, they are often repurposed into new batteries.
