Things are pretty gloomy out there.
Overnight, markets dropped over worries on interest rates.
Markets aren’t the only concern out there, though.
Flying balloons…
War…
Supply chain disruptions…
Inflation…
Geopolitical tensions…
…speaking of, things didn’t seem to go that well over the weekend at the Munich Security Conference, where Russia’s invasion of Ukraine copped all the attention, and accusations flew back and forth.
I mean, Politico even wrote a piece about it titled ‘It’s the end of the world as we know it — and Munich feels nervous’.
As they noted:
‘The only people smiling at this year’s security conference are the defense contractors. Arms sales are booming by all accounts.’
In fact, there’s been plenty of chatter about a third World War since.
So, among all the crazy geopolitical drama, it was great to hear about a different type of story out there…
An unlikely collaboration
Batteries are crucial for many of the trends that drive the energy transition, such as electric vehicles.
And while China dominates the EV market, things have been heating up in the US when it comes to EVs.
Regular readers know I’ve written plenty about the US’s Inflation Reduction Act (IRA), and how the US is spending billions of dollars into building up its battery supply chains.
And with the incentives from the IRA, many automakers have been announcing plans to invest in EV manufacturing in the US.
The latest is Ford, who announced last week it plans to build a US$3.5 billion electric vehicle battery plant in Michigan.
But here is the twist…Ford isn’t doing this alone.
Instead, they’ll be joining forces with Chinese battery maker Contemporary Amperex Technology Co (CATL), who will be providing the tech.
As you may or may not know, CATL is the world’s largest EV battery maker, with a whopping 37% market share. Its customers include the likes of Volkswagen, BMW, and Tesla.
The plan is to start producing lithium iron phosphate (LFP) batteries together by 2026.
Why LFP batteries?
You see, lithium-ion batteries aren’t all the same. There’s more than one type, and they vary depending on the chemical composition in the cathode.
Nickel manganese cobalt oxide (NMC for short) is the dominant lithium-ion EV battery today, where nickel is the main ingredient.
But LFP batteries have been increasing in popularity.
LFP batteries have some clear advantages. They contain no nickel, which is in tight supply. Or cobalt, a critical material that’s concentrated in the Democratic Republic of Congo (and its production has been problematic, to say the least).
LFPs are also cheaper and more stable, but the drawback is that they have less range.
LFPs are common in China, where they make up most of the batteries in EVs sold, and CATL is a major producer. Tesla has also been using them on their standard-range models.
But the deal could work well.
Ford will own and operate the plant, while CATL gets fees for its expertise along with a foothold in the growing US EV market.
And while the announcement has ruffled feathers in both the US and China, Ford, so far, is sticking to their guns.
Ford said the plant would make ‘one of the lowest cost US produced batteries’, which would help with making EVs more affordable while increasing EV uptake.
This battery race is up for grabs
One of the most common criticisms I hear about the energy transition is that the amount of critical materials we will need is staggering.
In fact, my colleague James Cooper, a trained geologist and commodities expert, has several plays on this theme in his service Diggers and Drillers. You can check all the details here.
But one thing to keep in mind is that when it comes to batteries, nothing is set in stone, and there could be a lot of disruption on the way.
The battery industry is furiously focusing on two areas.
One is to improve today’s lithium-ion batteries to make them cheaper. It’s why LFP batteries have been gaining ground.
The other is that they’re working on alternatives to lithium-ion batteries, since lithium-ion batteries require plenty of critical materials and aren’t the best when it comes to things like stationary energy storage.
There’s been plenty of companies experimenting on different types of batteries, such as solid-state batteries, iron flow, or zinc-ion to name a few.
In fact, CATL has been working on a sodium-ion battery, which uses sodium instead of lithium — sodium is way more abundant and cheaper than lithium — and could start producing them as soon as this year.
Let me just be clear, though, this is all at very early stages and experimental.
But the way I see it, when it comes to batteries, there are plenty of opportunities in critical minerals and companies developing alternative battery technologies for the battery of the future.
Best,
 |
Selva Freigedo,
Editor, Money Morning
