Tag: battery plants

OM in the News: The EV Battery’s Supply Chain Problems

The Swiss mining giant. Glencore, is suspending production at an unprofitable nickel operation in New Caledonia

The global EV revolution has been losing momentum as buyers are more aware of the vehicles’ higher prices, range limitations, and charging station shortages. So automakers such as Ford, GM and Volvo are delaying investments and striking a more cautious tone about the outlook for EV consumer demand.

But a big part of that revolution has been in the development of the core of EVs, namely the batteries. “Producers of lithium and nickel, which are used in lithium-ion batteries for EVs, have been stalling projects and closing mines to save cash,” writes The Wall Street Journal (Feb. 20, 2024). Prices of lithium are down as much as 90% since the start of last year, while the price of nickel has halved.

When Albemarle, the world’s most valuable lithium company, last year announced plans for a $1.3 billion plant in South Carolina, it was hailed as transformative for the state. The high-tech project was designed to process different sources of lithium and serve as a supplier of the critical mineral for South Carolina’s burgeoning EV industry, producing enough lithium for 2.4 million vehicles annually. Less than a year later, those plans have been hobbled by the crash in battery metal prices, undercut by a slowdown in EV sales in the U.S. and China. Albemarle has deferred spending on the project, amid companywide cost-cutting that includes layoffs.

Now the world is suddenly awash with the metals after producers ramped up new projects to feed the global EV industry and compete with China. (We note that boom-and-bust cycles are commonplace in metals markets, given demand can be unpredictable and new mines typically take many years to develop).

In the more-established nickel industry, some miners say they have been left with no choice but to close unprofitable mines. The downturn has wiped out more than a fifth of Australia’s mine supply. Mothballing any mine is a difficult choice, as companies pay ongoing maintenance costs that can run into millions of dollars a month when they aren’t producing anything to sell.

Classroom discussion questions:

  1. What is the US doing to create supply chains for EV  battery components? Is it working?

      2. How do mining firms forecast the demand for minerals that are so dependent on auto demand?

OM in the News: The New American Battery Plants

South Korea’s LG Energy Solution just said it would invest $5.6 billion in a battery-manufacturing complex in Arizona, the latest in a string of new plants by foreign companies as the U.S. transitions toward cleaner fuels. LG Energy’s new battery complex will mainly serve electric-vehicle makers in North America. The amount is four times larger than what the firm had initially pledged when it first revealed plans last year to manufacture the batteries in Arizona. LG Energy reassessed its investment options due to unprecedented economic conditions. Inflation has been driving up the costs of raw materials and other expenses for manufacturers worldwide.

The complex will consist of two battery plants and mark the largest investment ever for a stand-alone battery-manufacturing facility in North America. Battery makers have been pushing to build up a bigger production base in the U.S., which is looking to strengthen its local supply chains and reduce reliance on China while speeding up shifts to green technologies, writes The Wall Street Journal (March 27, 2023)

13 battery gigafactories coming to the US by 2025 – ushering new era of US battery production

The U.S. has offered billions of dollars in tax credits for EVs sold in the U.S., but it only applies if they have a certain value of their battery components assembled in North America. (The Arizona plant will meet the eligibility requirements of the EV tax-credits program.) The program has stoked complaints from foreign car makers, but has opened business opportunities for non-Chinese battery players including South Korea’s LG Energy, Samsung, and SK On, as well as Japan’s Panasonic, which have all announced plans for new manufacturing plants in the U.S., including many via joint partnership with auto makers.

When excluding China’s CATL, LG Energy is the top battery maker globally, accounting for 21% of the combined EV and energy-storage-system battery market by units sold. In addition to the Arizona complex, LG Energy is working to expand its battery-manufacturing base across North America. It has three plants it has built or is building across the U.S. with General Motors as well as one planned plant with Honda in Ohio and one with Stellantis in Canada.

Classroom discussion questions:

  1. What factors discussed in Chapter 8 (Location Strategies) are chip manufacturers using in making location decisions?
  2. Why are so many plants under construction?