Prospects for building a lithium-ion battery supply chain in the US and in Western Europe

A REenergize online dialogue with Josh Velson, senior consultant, NexantECA

Note to readers, you can follow this dialogue with the slides referenced visually here at Otter.ai.

Jim Lane
I’m going to turn it over to Josh Velson, with Nexant ECA. And he’ll tell you perhaps a little bit about that amazing organization as we get into the topic, Josh, thanks for joining us here on REenergize

Josh Velson
Thanks, Jim. Without further ado, I’d like to just go ahead and start with the presentation. All right, everybody. So first, again, thanks, Jim. For the introduction. My name is Josh Velson. I’m a senior consultant with NexantECA. As Jim said, I might have seen you all at ABLC.

Today we’ll be talking about prospects for building a lithium ion battery supply chain in the US and in Western Europe. So before I before I go into the subject just a very quick introduction to my company NexantECA, a boutique consultancy. We have our roots in the chemicals and refining industry, but for the past 15 years, we’ve built up our expertise in sustainability. And of course for the past five years we’ve been looking at the battery supply chain in detail. We have a traditional consulting practice a training practice and a subscriptions and reports business. And I’m part of that group. We published over 100 reports a year covering markets and profitability, technology and costs, and of course, topical reports.

Now without further ado, let’s move into talking about the battery supply chain and the reshoring opportunities they’re in. So just looking at a typical lithium ion battery, you’re looking at 80 to 95% of the battery made of formulated materials, so not just materials based on composition, but materials that are put together based on both their composition and their geometry at a microscale and macroscale.

This is a diagram just showing an example for an 18 650 LFP battery LFP being lithium iron phosphate, a very common type of battery and 18 650 being a form factor somewhat akin to AAA batteries.’ I believe Tesla’s using that in their large format automotive batteries, although most others use prism cells, which have much less mass devoted to the casing. So obviously you can see here this is a low end example of the amount of formulated materials that are going in prism cells prism sorry, excuse me, pouch cells, which are much thinner in terms of casing have even more.

So underlying all of these formulated materials as an individual supply chain that covers multiple different levels going into each one, obviously you have formulated anode and cathode as well as current collector foils, and dielectric polymers going into a layer structure for a traditional battery. But underneath that you have multiple different sectors that serve to refine this and create the special geometry and special composition that give the battery its properties. So here we have just some illustrative examples. In terms of what goes into cathodes, obviously, there’s a huge amount of complexity there. Just this would be an example for NMC type cathodes, but there are also ones for just writing as an example for LFP. You also see lithium going into both the cathodic and anodic material as well as to an extent into the electrolyte.

Conductive carbons, uses coating materials. And then of course, the very complex things that go into anode formulation like compositing with silicone, as well as traditional spherical graphite type anodes. Obviously, a lot of these right now are centered in Japan. China and Korea. And this is not necessarily as I’ll show you a function of resource geography, but a function of the fact that China has produced almost 90% of the world’s batteries for quite some time. And so what we see here is we see a lot of the chemical grades of metals that are going into the cathodes, lithium chemicals, conductive carbon manufacturing, that’s actually mainly centered in places like Japan, and the entire spherical graphite value chain as well as innovative relatively innovative things like battery grade silicone, just clustered in that area.

And in addition, you also see in China, Japan, South Korea, an exceptionally well developed end of life industry. And this is not only because they manufacture the batteries, which actually gives them a jumpstart on the ability to recycle things like cathode from cathode scrap waste that comes to the manufacturing process, but also because they’ve been using batteries, large format batteries for automotive, especially two wheeled automotive applications for much longer than us. And so they have a much more well developed ability to dispose of these batteries both in terms of being able to reuse them as Second Life applications and then also for destructive recycling and recovering the metals for them.

Because I think as almost anyone who’s participated in the battery supply chain knows a lot of those metals I’m talking about, we don’t have enough of them to maintain to maintain the kind of capacity that we need in terms of development for EVs. without resorting to reuse. And so there’s not only the talk about strategic metals recovery, and then disposing safely of the low value materials that are not necessarily good for recycling but also looking at places that have compliance based reuse. compliance based reuse mandates and in particular, looking at places like the EU with that.

And of course, that also ties into the growing disposal of waste electronics. Now, the good news for those of us who want to know how to alright how do we penetrate the formulated material sector is well unfortunately, we can’t but we can take a look at almost all the other supply chain aspects because these areas, have public facing standards and have well known processes and are effectively commoditized Catholic precursor not as much because there’s still quite a lot of know how they’re but when you’re looking outside of the formulated cathode material formulated anode material areas, you see a lot of places where people know what to do, and just may not have done them for a while or where there’s lots of knowledge and how to do them. And, for the most part, these areas are actually covered by the subsidies that we’re seeing. So I’m sure you’ve heard of the inflation Reduction Act I’ve quoted on this slide the the subsidy amount that can go into lithium chemicals, purified graphite, and all these other additives that are going in there are one step removed from the formulated materials supply chain. They don’t necessarily exist for the base part. But these basic parts are can be ostensibly included if they’re vertically integrated, which is not impossible.

We don’t necessarily see those from the EU yet and that’s probably because they were blindsided by the inflation Reduction Act. But we are seeing a gradual response and we are probably going to see a mixture of EU wide initiatives and also a massive national level responses because the EU has officially relaxed the restrictions on national level subsidies for these things. So we’re all waiting for bated breath, but suffice it to say that both the US and EU are likely to see subsidies for the development of the sector. So what’s the bottom line?

Well, there’s a lot of distinction complicated value chains that are underlying manufacturing batteries. They’re all currently set located in China. Japan and South Korea or at least concentrated there as to make no difference. There is a battery end of life sector that’s very underdeveloped in Europe in the US. And we have a we have an opportunity to take a look at the more commoditized sectors for which market entry is a lot easier, which fortunately for us includes almost all of the underlying supply chain prior to the formulated anodic and cathodic materials. And of course subsidies are available for these lower parts of the value chain. They just haven’t necessarily been taken advantage of so where do we see potential opportunity in domestic manufacturing?

Because it’s not just in the subsidies? First, let’s just talk for a moment about the scale of what we’re talking about. And I want to I want to especially give perspective on this because I’ve been following the sector I’ve helped develop some next TCAS reports on the subject since 2018. And the end of 2021. What I was seeing in terms of predictions for battery, Evey battery penetration or battery electric vehicle penetration in the US and Europe was somewhere in the realm of 15 to 30% of cars sold by 2030. Then 2022 happened and suddenly everything has changed and it’s changed in a good way from those for those of us who like the idea of battery electric vehicles on the road. We’re looking at 50 between 50 in the US and 60 to 70% penetration in the US and EU light vehicles markets in 2030.

And that is enormous. I did a rough back of the envelope just using a gen two Nissan LEAF power pack. And this ends up looking at 600 gigawatt hours of batteries used new batteries used for region so it’s been an enormous acceleration of the timetable, so to speak for better electric vehicle adoption. And so this is just here a diagram of the projects that are projected these this current as of November 2022. So a little bit out of date at this point, but you’re looking and you’re seeing a ton a ton of battery, battery manufacturing going up in terms of gigawatt hours per year, but I think it’s very apparent to anybody who’s been looking at the sector that the acceleration has been so sudden that battery capacity hasn’t caught up yet. In terms of announced capacity.

Everyone is still falling short. So we’re still we’re still looking at significant imports from the China, Japan and Korea area. And in that light, it might be just useful to characterize this not necessarily as reshoring but as simply keeping up with demand. There’s been under investment and it’s true, but there has been some movement in battery supply outlets. However, if you look at the capacity numbers for each of these battery supply elements, and this here shows the projects that have received grants from the US DoD in the United States, the large, even the largest of them can only supply a fraction, a relatively small fraction of the kind of capacity that we see going up plan for 2030 in the United States.

So the way the DOE characterizes this for example is precursor, for example being mostly cemented cementing polymers PVDF for the most part, and you also see a very strong dearth of recycling in the United States. The EU is a little bit different because it’s regulation driven but it’s still very small scale. And you also see quite a lot of here a concentration and Catherine there’s a reason for that because Katherine’s very high margin sector, but but the point being here, there is under investment, so there is more opportunity to take up some of the slack in the domestic supply chain. Here we go. So let’s start from the basics. Many of the things that we saw in the diagrams showing the value chains going up into cathode and anode precursor, the two highest value components are based on stuff that is mined. Not all of it, but a lot of it and you might ask well, why why would we do this in places like the US and the year and Europe when we don’t necessarily have those resources? Well, the answer is that China doesn’t necessarily have these resources either.

China is one of the is genuinely naturally endowed with one of the largest natural graphite sectors in the world, both in terms of exploitation and reserves. But outside of that, there isn’t really necessarily an inherent advantage processing in China in terms of resource geography, and also places like the US and Europe have advantages that China does not notably in lithium and crude oil to a lesser extent, although that doesn’t necessarily differ much in price only in a security sense. So, on the face of it, the US and Europe are not necessarily poorly positioned to move into this. One of the things I’d like to highlight notic sector which is an area that’s near and dear to my heart, and I don’t think gets enough attention is that when we’re looking at natural graphite processing, we don’t necessarily have the resources in the US from Europe, but we do have them in places like Madagascar, South Africa and Brazil.

And while China is one of the largest producers of natural graphite for battery use, it still depends on imports to fulfill its enormous demand. And so it’s not out of the question to see players in the US and Europe, securing contracts to get this graphite and moreover, I think something that is not often talked about in terms of the natural graphite sector is that domestic processing is going to require is going to require purification on site which is actually a rather rather high value added and it will require micronization and sterilization on site which is again rather high value added. We already see technology providers in the US and Europe being able to provide micronization and sterilization equipment superior to what is routinely used in China, where they have large trains of cyclonic mills. We have technology providers who are basically essentially saying that they can provide the same performance in micronization.

It’s feminization with far less waste, which is a huge problem. One barrier however, is that for the most part, we don’t have the ability to use the same processes and that’s where graphite that China does. This mainly being that China relies on very strong acid purification including hydrofluoric acid. You see a variety of people who are going ahead and pushing other purification methods, but we don’t necessarily see proof yet. So there is some technical risk remaining. We are much better positioned in the US and Europe however in looking at synthetic graphite, because for the most part, we still make synthetic graphite just not synthetic graphite for batteries. In terms of the synthetic graphite hierarchy the highest value is actually in large format machinable electrodes used for electric arc furnaces and steelmaking and not so much for the smaller diameter, porous graphite that is used either for electrodes and Foundry applications or increasing spherical graphite for battery manufacturing. But that doesn’t mean we’ve lost the knowledge of how to do it.

It simply means that we have to gear down or downscale. These things didn’t move to other places because we could do them. They move through most part for cost reasons and now we see a much very quickly expanding market in an environment where we have or will have domestic subsidies for manufacturing. You might object for a place like the US or we don’t have very large nickel or copper smelters. Well, why would we want to process minerals domestically? As it turns out, we don’t necessarily need to what we’re looking at here is not Pyrometallurgy processes for producing reduced metals.

What we instead need are highly pure chemical forms of the metals, things like cobalt sulfate, nickel sulfate, lithium carbonate, lithium hydroxide, and in order to get them what’s required is a hydrometallurgy releasing facility rather than the super ultra large scale kinds of mining operations that you might see in places like the Philippines or Australia or Madagascar. And you and we have the technology to be able to do this.

It’s much lower impact in terms of capital costs. In terms of land use, and in terms of environment. So we do have this opportunity. And as before, China doesn’t have these resources domestically. So we’re on essentially an even footing even better when you consider in some cases that the transport costs that are places like out of places like the Dr. Congo would be slightly less, not that much less because most of the expenses in land transportation, but slightly less because we are physically closer. This is not necessarily the case in Europe, but the US is very well positioned for lithium.

We have some of the best brine deposits and hardrock deposits in the world constituting 10% of current known reserves. And it’s likely that we’ll discover more because of our extensive oil and gas industry being able to tap brine wherever we need to and more generally, lithium resources are concentrated in the Western Hemisphere. With the largest brine deposits and highest quality Brian deposits located in the cluster around the Atacama desert and Bolivia, Chile and Argentina and looking at the level of investment of investment, this is already a good idea and we’re looking we’re probably going to get more you see inflation reduction that reduction acts subsidies have only accelerated the trend of domestic lithium mining in the United States.

And don’t get me wrong. There are deposits in Europe there. Europe contains about 3% of the world’s deposits and the fact that Europe is well developed and built up and you can easily do this with minimal transportation costs and infrastructure means that they can be exploited relatively easily.

And a word on recycling So currently, we have a recycling sector in the United States that has two things going against it. The first thing going against, of course, is that well, I should say three. This let’s say the zero thing going against it is that there isn’t really that much material to go around. Recycling sectors really depend on logistics. And the thing that really drives logistics and producing sheer volume for scaling recycling is automotive batteries. That’s at a very early stage in the United States. And one thing going against it is the fact another thing the what the first thing after the zero that would be going against is the fact that we have insane levels of market poll in the United States, from China, mainly companies from Japan, Korea and China setting up in the United States and exporting metals concentrate powder rather than recycling it here.

And to Europe, which has a lot of smelters with a lot of spare capacity that can do a lot of Pyrometallurgy and recovering these metals more cheaply than we might be able to do it domestically. The second thing going against it is that we have an extremely ad hoc regulatory system. And what this means is that we have no established conventions for producing for logistics and for recycling batteries. For the most part, they’re still treated as all kinds of as just mixed kinds of E waste, which I think is definitely not going to be the case in the future.

What we have in us as the ideal conditions for valuable metals recovery value driven regimes, in scrapping businesses, much like we see with say copper scrap, but we also have that’s a huge advantage is that we have probably the most advanced waste electronics and itd industry in terms of sort of regulated aboveboard formal recycling in the world. It’s highly competitive. It’s expanding rapidly. There’s huge cluster going up in around Georgia, in the Atlanta area for itd processing and for recovery of valuable metals from metals concentrates and we can look into that and go with it and run with that advantage.

Europe has a different advantage. Europe has the advantage of smelter infrastructure and a regulatory regime that’s been encouraging over 50% collection of lithium ion batteries for several years. Now. And the disadvantage of this, of course, is that we have a regulatory regime that is based on mass balance, essentially, a certain limit of battery mass that has to be reused, which is influencing their technology, but it also is meant that the technology has developed earlier and that they’ve developed systems of collection faster. And of course, the EU has leg up in terms of concentration although many domestic manufacturers in the US for battery electric vehicles are adopting this but they have the explicit clear regulation of extended producer responsibility so we know in Europe who is going to be accumulating the waste batteries, and that means that it’s much easier to set up a recycling sector there in that way.

But these are these opportunities obviously have a ton of nuances and I’ve only covered some of them. This chart. This table here, excuse me, provides just some of the opportunities and threats for each major sector here. I won’t talk about all of them, but suffice it to say that it’s an extraordinarily complex subject, in which the overall outlines are clear. The overall case for investing in supply chain is clear, but that any one sector has lots of little wrinkles that you have to be aware of before jumping in with both feet. The bottom line here is that you have to look at the upstream you have to look at volatility and demand you have to look at potentially the multiple end uses for which batteries may not even be the primary favorite example of this is nickel. Global nickel demand is driven by stainless steel and not by batteries. And it’s also driven by things like resource nationalism.

If you’re at all familiar with the nickel market at the end of 2021, there was a gigantic table flip when Indonesia decided that it would no longer approve projects to export nickel concentrate from its laterites. And so that’s just one of the examples of the upstream risks that comes in with looking at Mining and Metals sectors with geopolitical concentration. Each of these sectors has a different margin that can be captured. So it may be it may be very essential to be processing say natural graphic concentrates, but you may not necessarily be capturing value added there. For anybody who’s looking to get into this area, each of these processing sectors can have different areas of synergy. If you have an existing business, you may be more interested say in lithium processing and in lithium processing and metal processing than you are in something like graphite. And there’s still technical risks.

So obviously there’s technical risks as I noted in cathode precursor manufacturing, but just to give the example of natural graphite processing without hydrofluoric acid to reach the level of battery purity, that in and of itself remains unproven and a technical risk. And there are already people here there are competitors or potential partners as you might view them. And something that I haven’t mentioned before but should be thought of is that battery technology is evolving. We’ve already seen a wholesale move away from cobalt and Chelsio into ever decreasing amounts of cobalt and NMC batteries and then the return to favor of LFP and then perhaps in the future LM FP and who knows what the future may hold in terms of overall technology change and how that might invest? how that might impact the investments you make today.

With time horizons on the order of 20 years. So I would like to talk a little bit about a modest proposal that we have for producing for producing reports to help you make sense of this and I’ll go through it very quickly. Next NEC, as I said, has developed lots of expertise in this area over the past five years, especially looking at the battery supply chain. And so we have coverage of almost all of the sectors that we noted were commoditized not just in the upstream, but also in the downstream particularly in areas that are not necessarily well studied from the perspective of the investor, such as waste electronics and destructive recycling, as it exists not only in Europe, but also in places like China where it’s exceptionally well developed.

We are used we are able to use our market technology and predictive predictive risk analysis expertise are to identify the best sectors for investment and the best ones with suitability for other chemical industries to produce strategic overviews, of investment opportunities. We’re also able to take a look at the players within each sector and see from them what their current strategy is and our business development plans, and then put in context, their capacity and future commercialization potential. We plan on publishing two volumes and then your future first one covering mainly metals these being lithium, nickel, cobalt, manganese, and end of life recovery which is primarily as we see it a metals recovery enterprise and the other volume focusing on non metals these being primarily and unrelated materials as well as polymers conduct as well as polymers conductive carbons, and electrically here are just I won’t linger on this too much because you can see this later when it gets posted. But here’s some proposed Table of Contents.

Thank you all very much for attending this talk. Again, very happy to be here.

Jim Lane
At the top of your value pyramid, we see purification, milling and circularization the costing and formulation and the anodes Is that where you see some of the more developed economies focusing in the near term or is that are opportunities everywhere?

Josh Velson
I would say that certainly there are opportunities everywhere. The reason I don’t focus on that area is that in in our research at next and ECA, what we found is that those areas are one of the few areas where trade secrets and technological know how really play a huge role. And I’m not saying that the US can’t do that, but I’m saying that it’s not the easiest sector to get into because it requires so much specialized knowledge. By contrast, almost all the other areas have widely available technology and it’s widely understood how to do it. You simply just have to go and do it. It would be what I would suggest is that you can think of all of those sectors below coding decoding and formulation area as places where if you wanted to, you could go it alone. Whereas where you’re if you’re looking at formulation, coding and actual genetic material, you’re really looking at multi year r&d efforts or partnering with a with an experienced producer.

Jim Lane
Just broadening the question. This period was specific to anodes but it could have been many of the other areas that you brought up which is you know, cathodes, and you know, just everything in terms of lithium production, etc. Do you see do you see an opportunity? Do you see the developed economies starting at the top of the pyramid working their way down? Or starting at the bottom of the pyramid and working their way up? Or is it a little bit of sideways, everything everywhere all at once?

Josh Velson
What I actually am seeing right now as I’m seeing people are starting at the top of the pyramid which is to say manufacturing the batteries themselves and some casing cases actually licensing the technology directly from China for the manufacturing the batteries and starting at the very bottom in terms of being able to acquire these resources and purify them. And it’s really that middle the middle area where you’re talking about the secret sauce, the ability to compound different sources of graphite, and lithium and silicon to produce an anode precursor, where you’re seeing much slower movement probably because of the things that I spoke about either lots of r&d required, or partnering with an existing expert.

Jim Lane
I’m going to ask one more question about about technology here just for a second. And I’m going to ask another one about about the margin division and we’re going to get everyone into the mix here. So do get your questions and comments and we’ve got a few coming in. Let’s get some more into the mix. A lot of people here today. Let’s make sure every one of you is part of the discussion and is networking like crazy, but I wanted to ask you Josh about the about the first of all the margins. You mentioned that margins will vary the various sectors that people can enter into Do you have any insight as to where you think those will be larger and more reliable for those that are contemplating a market entry? Where where might they be in safer waters in terms of not having you know commodity? You know, margin rollercoasters?

Josh Velson
That’s a very tough question to answer. That’s why we see. Right? It’s a very tough question to answer and if I could go briefly over to the looking at the value chain here. I think in some ways it’s too early to tell. In other ways it’s it there are answers but there are buts right. So we’ve seen a huge amounts for example of attention devoted to cathode precursor and cathode precursor chains. And it’s well known that the difference between the some of the materials going into cathode precursor and the cathode precursor itself is on the order of 10 to $20,000 a ton, which is enormous. But on the other hand, you have the bots, the bots being well, if we put in investment now maybe this better precursor of Catholic priests occurs. precursor formulation goes out of fashion. Or maybe we see a situation in which you see a race to the bottom where you’ve seen with a lot of these other things. Another example might be if you’re looking again, I keep returning to graphite or apologize because I’m an expert in graphite, but you see examples in spherical graphite, where synthetic graphite despite the fact that it’s something like eight times as expensive as natural graphite in a good year, is was historically preferred for the purposes of anodes and it’s known to be very high margin. Certainly, higher marks certainly higher margin than producing electrodes from carbon for aluminum, which is another competing use and higher than foundry electrodes. But at the same time, you’re seeing increasing substitution of natural graphite simply because simply because of the lower price, and so they’re putting in as much as they can. So it’s very difficult to say, to an extent, like yeah, there’s lots of places that are really high margin, but at the same time, none of these is really future proof necessarily.

Jim Lane
Let me ask you, something you emphasized a couple of times in your presentation was the opportunities and waste recovery, an area where the user has a bit more of an advantage than the original manufacturer because of course the user is right where the where the waste is. So the closeness of a developed economy to the waste battery is an opportunity. I wanted to ask you about whether you think there, the emphasis that you see the companies that you see emerging are commensurate with the kind of growth that you’re projecting and talking about, you know, 30 50% market shares and the next step new vehicles in the next seven years. That’s an awful lot of waste recovery opportunity. Are we seeing the company’s come to life and and expanding or is this an area that’s underserved waste recovery?

Josh Velson
I would say that it’s an area that’s underserved. And I really feel for the people who are investing in the sector because as anyone who’s involved in recycling lithium ion batteries knows. Number one, you know that size matters, capacity matters, but at the same time, you also know that well, all this mania for electric vehicles is not going to get me a substantial amount of feedstock until the first batteries in quantity really start wearing out. So that’s, you know, we talked about 3040 to 50% market share for new battery electric vehicles in the United States and light vehicles and 2030 will to a recycler that means and maybe we’ll start getting supply online in 2035. And so it’s a very difficult situation in which it’s advantageous to think about investing now, but at the same time to build capacity now. You have to solve a feedstock problem that’s not going to exist in 10 years.

Jim Lane
So some big challenges in terms of timing and how to structure the market entry. So good reason. Absolutely. Absolutely. You engage with experts at Nexen ECA let’s get some questions in here from from our questionnaires and our participants today. Join advance IQ. Best Buy Phil’s yo sale, so very interested in the world of, of advanced vehicles. JOANNE I see you have a question about first of all, I see you asking about graphene versus graphite and we do have a world class graphite expert. So, Josh, what about graphene?

Josh Velson
Well, I would say that I don’t want to discount the possibility of using graphene for intercalation batteries. But I would say that right now, the near term focus is on silicon compounding. You know, obviously formula should familiar with the space silicon has roughly an order of magnitude higher ability to carry lithium and very crudely a lithium ion battery can be thought energy content can be thought of as the amount of charge you’re carrying lithium times the amount of voltage you have and while voltage just doesn’t really apply to anodes. The amount of charge does. And so there’s been a lot of talk about graphene, there’s always been a lot of talk about graphene. Right now the volumes I see are too small to really make a difference. And as with solid state lithium, which is another major competitor in terms of potential competitor to spherical graphite, silicone composites. I don’t see them surpassing that in the near future. Certainly not in the certainly not in the next five to 10 years. Now. The truth is that every major innovation in batteries in terms of cathode and anode has taken 15 years from concept and early manufacturing to real fruition and dominance. So who can who can say what will happen 15 years from now, but currently I don’t see graphene making a huge impact.

Jim Lane
Another question that came in from Joanne I’m gonna summarize this and Joanne You’re welcome. To to unhook if you want to unmute and ask it yourself but it has to do with the financial feasibility of what she’s referring to as Fairtrade batteries. These are ones that are mined responsibly. So sustainable batteries not just effective batteries, do you see that as a as a challenge as an opportunity? Obviously mining is carried around carried out in different practices around the world. But, you know, obviously we want sustainable, environmentally friendly, socially. Fair batteries as well as functional ones. Do you see that as a challenge or problem? Any insight? Oh,

Josh Velson
absolutely. It’s a challenge. It is absolutely a challenge, right. I mean, anyone who’s familiar with the resource dynamics at play here will know that it’s a challenge. You have currently obviously you have huge environmental and labor issues and going into traditional areas where you’re getting nickel. So I mentioned the Philippines has a huge history of conflict, minerals violence. Same with Madagascar. Same with Indonesia. You have tales of labor abuses. And environmental violations coming out of Bolivia, Lesotho and Chile and Argentina but still, you know, not necessarily the greatest. And you have the mother of all liabilities in terms of in terms of ESG in the DR Congo where you have most of the spare capacity that came up during the 2019 Sorry, excuse me. 2018 Price fly up for cobalt came from essentially gang miners, the polite term being artisan miners but you know, people who mined who break into foreign concessions and mine or we pick and shovel and sometimes die from mine cadence. It’s absolutely a challenge. I don’t see this as a Fairtrade battery certification type of challenge but rather one that can be solved with Fairtrade battery certification, but with and this is going to sound hopelessly naive, but with better conflict mineral standards. And, you know, obviously I want to give a a ironic shout out to the London metals exchange who delayed their conflict mineral standards implementation until this year after the huge conflict minerals fear in 2018. And it just goes to show you the the enormous amount of inertia and the enormous amount of incentives that a lot of companies have to not obey these standards. And and try their try their best to get around them because they’re pesky and inconvenience and don’t help them acquire supplies faster, which is all they care about. And they here I’m not going to name names in particular, but if you look at the kinds of places in the Congo that were buying, artisan, artisan war, it’s mainly it’s mainly ones with ties to the to places with poor corporate governance in terms of ESG and poor human rights records.

Jim Lane
So a lot of the same problems we’ve seen in conflict diamonds recurring and Africa once again, so absolutely a challenge for us to solve another question that came in, brings us back to graphite, a more inert subject, perhaps. And it has to the question comes from Jonathan art. Thank you, Jonathan, for the question. It’s about the relative use of natural versus synthetic graphite and the market prices. Is there a bias one way or the other? Can you can you discuss why? Why one way or the other? Absolutely.

Josh Velson
So, just to give you an idea of what we’re talking about here, relative pricing of synthetic graphite, you can see. You can see synthetic graphite costing you between 12 and $15,000 a ton. Similar prices for natural graphite, even in purified state are around 2000 to $3,000 a tonne. Why synthetic graphite? Well, for the most part, synthetic graphite is easier to control in terms of structure and purity. It’s historically been the preferred feedstock first for a notic material going in and it is easier to get a more consistent product out of it. Anything coming out of the ground naturally has a lot of variability associated with it. The to get into the some of the weeds of natural graphite valuation. The larger the flakes that you mine, the more valuable it is. And the pure it is, the more valuable it is, but every mine is different. And you have to deal with what comes out of the ground. And there is inevitably costs associated with purification. There are some advantages to natural graphite certain kinds of natural graphite are more resistant to power fade, which is one of the ways and batteries degrade than synthetic graphite. Synthetic graphite tends to be more resilient towards capacity fade. This is some of the special sauce that I’m not too sure about in terms of in terms of formulation, and compounding, because not only are we talking about these players, like SK for example in South Korea, or LG that are very, very good at blending. Graphite was silicone but they’re also blending natural graphite with synthetic graphite, and being able to take advantage of the properties of both. There is a secular trend of trying to use as much natural graphite as possible simply because it’s cheaper. But we see some pretty darn big fluctuations in terms of that. In 2020, there was a in 2019 and 2020, I should say the COVID years. There was as much as 70% of the anodes made in the world, we’re using natural graphite, or rather, it’s 70% of the amount of materials using natural graphite rather than synthetic. But then the year afterwards, it swung back to 50 to 60%. And so part of that was probably down to supply shortages. Probably part of it was down to probably the shutdown in China. And it also goes to show that to some degree the synthetic and natural graphite feedstocks are substitutable though not completely.

Jim Lane
Just we had a question about saline silicate seen saline saline so again, so market growth in the US.

Josh Velson
I want to say that I know of silence that we do cover silence. I’m not an expert. Personally. Cylons are not the component that we’re talking about in terms of batteries. What’s going on in batteries is that in anodes, silicone can theoretically hold up to I think for every six silicon molecules, you’re looking at up to 64 lithium molecules that it can hold, but if you use it by itself, it has really awful dimensional expansion issues. And so what’s happening now is people are blending silicone, so more elemental silicone or slightly oxidized silicone, so some partial silicon oxide, not si oh two but si Oh 0.2 or something like that. Into in nanoparticle form into spherical graphite, which gives it the ability to resist dimensional expansion. Get carry twice, three times four times easily. The amount of lithium that a spherical graphite cannot alone would be able to use. So it’s not silanes per se, but something closer to two semiconductor grade silica.

Jim Lane
Let’s do a couple of introductions. We got a couple more comments coming in and let’s let those filter out. But I noticed them some of the people that come here almost every week and talk about some of the technologies that relate to the bioeconomy or have some activities worth mentioning in this particular area. Carrie Chase is here with us. We usually carry here about all the in group but today you also have your your your twin responsibly with alien metals, which recycle spent catalysts and Evie batteries so they might want to unmute there and come on and say a word about alien metals. Carrie, are you still with us? Carrie Chase? Well, Carrie is unmuting. There. Let’s we also had Lisa Hughes coming in here joining us from Minnesota economic development. Lisa, always good to have you here. Can you perhaps unmute and tell us a little bit about what’s going on in Minnesota with clean tech in this particular sector. Are you doing anything in the area of electrics? Please let us know. Yes. Good

Lisa Hughes
morning, Jim. Everybody here. So we are receiving I want to say a lot of requests for information. I was gonna say a flood and I backed it off to a lot requests for information from Mega sites. For evey battery manufacturing. And so every bit of information that I can get more learning that I can do. That’s what I’m doing. Of course, as you know, Jim, I focus for a very long time on industrial biotechnology primarily advanced biofuels and chemicals. So batteries is a little bit newer. To me, believe me, we are still super busy and in renewable chemicals and advanced biofuels. There’s no doubt but batteries is becoming becoming a topic that we need some expertise on.

Jim Lane
Actually, let’s bring this over to Josh Josh. Lisa brings up a good point leaving aside the advanced fuels not much to do with EVs, except that it opens up perhaps some ethanol capacity to make aviation fuel. But what about renewable chemicals? What are the roles that for those that focus on on the molecules as opposed to the electrons Where do you see the big opportunities to decarbonize batteries through renewables?

Josh Velson
Hmm, that’s a good question. You know, when you’re looking at places that use a lot of chemicals in the battery supply chain you’re not going to necessarily find very much. Yeah, in all the areas that feature hydrometallurgy which is to say, mainly water based chemistry for purification. You’re going to see quite a lot of chemicals used but comparatively speaking these are relatively close cycles, small volume. And not a huge, they’re great for people who are producing specialized products, not a huge opportunity in terms of commodities. What I would actually say is I would turn this question around and say, Well, how can the coming wave of batteries help chemicals because one of the other things that I do is work a lot in power x. And what I see in terms of power to x is that I see a huge opportunity for places with lots of intermittent power to take advantage of this new battery building capacity. Not all of its going to come online for in time in time to meet the wave of batteries. So it’s going to be early. You’re also going to see lots of Second Life applications as I see here on the slide. Second Life applications meaning that you have large amounts of applications where say automotive battery electric vehicle batteries, that are no longer suitable for use in electric vehicles, but still have quite a lot of lifetime left in them can be used to support power to x ventures for hydrogen and anything that comes from hydrogen, methanol, ammonia. Sustainable aviation fuel of course, and everything else down the line. To emphasize this, I point out that typically speaking, a battery electric vehicle advertises a certain capacity and its power pack. And the consensus that I’m reading right now is that around the time that power pack fades its capacity to 70 to 80%. It’s time to replace it with a new one that takes maybe four or five years or actually technically speaking, a number of charge discharge cycles. But that’s still a battery. That’s if you’ve got say a 40 kilowatt hour Power Pack going in. That’s still a 35 kilowatt hour Power Pack. That’s really good idea for a place that has a lot of wind, places like Southern Minnesota and Northern Iowa, to be able to say, Well, hey, let’s stabilize a grid here. Let’s take advantage of our negative electricity prices and be able to deliver consistent, low cost renewable power to places that want to make biofuels about chemicals. And also, Josh

Jim Lane
just add the potential down the line of using 4d printing technology to have electric highly conductive polymers Sunday as the as a an alternative, a lightweighting alternative to some of the metals we’re talking about today. But that’s kind of down the line, some research in that area for those that are that are following that if you go Science Direct Mail company, Reed Elsevier has that and has a lot of information on that particular topic. I had a just a couple more introductions to do. I thought we might if Simon Doughty is still with us, scenario, Simon. Usually we talk about renewable and renewable fuels when we have you on but I see you’re interested in graphene oxide filtration systems, or lithium refining Simon he’s still with us. If so, once you unmute, tell us a little bit about that.

Josh Velson
I am very much learning exercise today. I consult in those areas that you mentioned from my main people and I’ve just been looking at the graphene oxide filtration systems based on some friendship from my university days. company in the UK that I’ve been looking at in the in the UK has this technology that they use in salt water to drink two potable water systems. And but I know that this technology also works in the lithium purification. So I’m just trying to learn about it and see if there are some opportunities over here to to help this company in the UK. And we’ll take it from there. Very, very speculative.

Jim Lane
I wanted to ask you a little bit about geography because the the the headline of our topic here was US and Europe, but we’ve we’ve mentioned some of the opportunities in emerging parts of the world. I wanted to ask you specifically about India and also Brazil. You mentioned Brazil a couple times in your comment some some raw materials, but also what do you see a lot of comments about China? What about India’s opportunities in this area of manufacturing, etc?

Josh Velson
Well, I think India has its own initiatives being put together they’ve been in place for quite some time for domestic manufacturing of batteries, I think right now, the main effort there is in renewable energy itself for things like solar PV. India has, I think, a formidable challenge in terms of industrial policy because they’re a little bit behind in terms of putting together the putting together the domestic manufacturing infrastructure for batteries, where they are actually ahead, though, I think is in recycling, because India has an exceptionally good regulatory framework for lithium ion battery recycling and for better recycling in general. And you see, among the many innovative companies outside of China focusing on lithium ion battery recycling, we see quite a few Indian players who are looking and saying, Well, look, we have the regulatory framework and collection frameworks in place so that when battery electric vehicles start coming in, in large numbers to India, we will be able to gather them and and recycle them effectively and at low cost with well developed technology.

I’m unaware of the current status of industrial policy in India for battery electric vehicles, I think the focus of this is on the US and Europe because simply that’s that’s where the subsidies are right now in terms of sheer magnitude. But I wouldn’t discount India, especially simply, we have to we have to wait for the government to get around to it because the Indians are very good at industrial policy. They’re just not necessarily the fastest. Now I mentioned Brazil a couple of times. The I mentioned them both times as a as a place where you can get raw materials both nickel and graphite.

I would say that Brazil is a very interesting situation right now because and I confess that I haven’t really looked at it because in that way because of the situation with such a huge penetration of flex fuel vehicles and with ethanol manufacturing is domestic industry. battery electric vehicles are direct competitors that and I confess, I don’t know necessarily the extent to which the domestic manufacturing sector in Brazil will pivot to battery electric vehicles or just stay with their successful proven domestic biofuels industry. In terms of being able to add value, obviously, if you’ve got the resources, you can do a lot of the value added steps where you are and then export later. And Brazil certainly has the capability to do that. Not just with nickel and graphite, but with anything that it can choose to import. It’s just a matter of it’s just a matter of economics and incentives. Josh,

Jim Lane
let’s go back and highlight your upcoming reports and get your contact details before we close up. We’re gonna button up in about a minute here. So let’s

Josh Velson
say my contact details are at the top of the slide Davidson at Nixon eca.com Happy to answer any of your questions or inquiries afterward after the presentation. This upcoming special report of ours we are looking to have it out by mid year and starting with lithium ion battery metals value chains and non metal value chains and the second volume coming in the second half. The idea being to take a look at each of these sectors as an investment opportunity and being able to rate them from a strategic perspective as well as more quantitative factors. Such as capital intensity and margin.

Jim Lane
That’s awesome. Thank you for joining us today I want to remind everyone that the episode is is being recorded and later today you’ll be able to access the episode in Robin dot stream. We’re going to share the slides as soon as we get them from Josh in the digest and otter has been back with us today taking live dictation. Hopefully you had some opportunity to to take a look at that transcript in real time. We’re going to be back next week for re energize on Tuesday, May 2 and new look at new technologies impacting our energy mix. Join us for 12 Eastern time right here on our zoom channel. Again. Thanks Josh for for joining us. Until next week. I’m Jim Lane, wishing you a great week ahead and a safe one too. As you re energize so long. I’ll see you next time.