Quest for critical materials fuels growth of North American battery hub

North America is on the brink of becoming a battery production hub that will help power the global energy transition, while expanding the region's fleet of electric vehicles.

Automakers, spurred by US government support for the sector and their own goals to expand EV model offerings, have announced more than $100 billion in new investments for the development and production of EVs in the nation over the coming years.

Additionally, the Department of Energy announced in July that $1.7 billion will be provided to modernize and convert US traditional auto manufacturing facilities to produce EVs and their components.

Battery manufacturing is likewise seeing a dramatic influx of funds, with an estimated $50 billion being poured into battery production facilities across the continent through the end of 2024. Companies including Panasonic, LG Energy Solution and Samsung SDI are establishing or expanding their operations, signaling a robust future for battery supply chains within North America. These facilities are projected to support a cumulative battery production capacity of 1 TWh by 2030.

The state of critical materials

Securing a stable supply of critical materials in the region is paramount to ensuring this expansion is successful. Investments in lithium and nickel projects are forecast to reach approximately $10 billion by the end of the decade, yet roughly 75% of the lithium and nickel used in US electric battery production is expected to come from non-domestic sources, according to the US Census Bureau. Geopolitical concerns have strained relations with some of those suppliers, who also are keen to stockpile their own supplies of raw materials.

There are at least 35 electric battery manufacturing facilities either planned, under construction, or currently operational in the US, according to S&P Global Commodity Insights data. Six of the companies developing these facilities have committed more than $11 billion toward future lithium iron phosphate (LFP) manufacturing facilities, while there are also several announced nickel-cobalt-manganese (NCM) projects, underscoring the significant investment and emphasis on both.

A Commodity Insights analysis showed that the cost of an electric battery pack is significantly influenced by the prices of the raw materials utilized in the cathode, which constitutes 40%-60% of the total cost of the battery cell, depending on the chemistry involved. A broad drop in battery metal prices decreased the overall cost of the average battery pack by about 30% year over year in 2023.

As nickel sulfate has gained prominence as the preferred chemical feedstock in the production of NMC cathode active materials (CAM), owing to its higher energy density, market participants have expressed a strong desire for greater clarity and transparency in the spot pricing of this material.

This led Platts, part of Commodity Insights, in June to expand its global battery metals pricing offerings to include the first-of-their-kind daily CIF US nickel sulfate assessments. The new assessments reflect a daily differential over the prevailing exchange value for nickel metal, as well as an all-in calculation representing the sum of the differential and the LME official cash price, multiplied by a factor of 0.223 to convert nickel metal to nickel sulfate.

The Platts nickel sulfate premium has remained relatively steady since its launch at around $2,700/t -- closely tied to international fundamentals and factoring in inland and seaborne logistics costs.

In 2023, the US imported around 30,000 metric tons of nickel sulfate, mainly from Canada and Indonesia, according to customs data.

Market participants expect nickel prices to stabilize in the short term but potentially trending down in the long term amid more supply expected to come from Indonesia.

Sticker price differences

Spot nickel sulfate prices are not the only ones influencing the cost of electric battery packs, nor are they the only price offerings from Platts in this space.

Decreased lithium prices have had an event greater impact on the cost of producing LFP batteries.

Lithium carbonate comprised 89.4% of total raw material costs for LFP cathodes and lithium hydroxide made up 62.9% of raw material costs for NMC-811 cathodes in 2023, according to Commodity Insights data. Lithium hydroxide is a chemical that has historically been more expensive than carbonate but has tracked closely or below lithium carbonate in recent years.

The Platts DDP US battery-grade lithium carbonate price was assessed at $12,550/t on Aug. 20, down 18.5% from the Jan. 29 assessment launch.

Approximately 125 lithium extraction projects are underway in the western US, facing challenges beyond low prices, such as complex regulations, lengthy permitting processes, environmental concerns and a lack of commercial-scale extraction technology.

As North America forges ahead in establishing itself as a key player in battery production, navigating the complexities of key raw material sourcing and pricing such as nickel and lithium will be essential for harnessing the full potential of EV growth and achieving a resilient, sustainable energy future.

By leveraging proximity, supply chain security, government support, and sustainable practices, the US can strengthen its battery production capabilities, while Canada and Mexico are expected to enhance their mineral market development and investment attractiveness. Together, they can forge a robust North American supply chain that effectively meets the demands of the evolving clean energy landscape.