Anode Supply Chain Forecasting - Quebec.ca

Anode Supply Chain Forecasting:Challenges in predicting the future

Graphite + Anodes 2019, Los Angeles, US, 11-12 November 2019

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© Benchmark Mineral Intelligence 2019BENCHMARK MINERAL INTELLIGENCE

Government policies (and public opinion) are starting to shape OEMs commitment to zero emission vehicles

Note: ICE - Internal Combustion Engine

Brazil: Target of 30% penetration of electric vehicle sales by 2030

USA: No Federal target set, 10 states have set targets for 100% zero-emissions vehicles by 2050

Canada: Target of 30% penetration of electric vehicle sales by 2030Quebec targeting 100% zero emissions by 2050

China: Target of 5% penetration of electric vehicle sales by 2020, 20% by 2025

Japan and South Korea: Target of 30% penetration of electric vehicle sales by 2030

India: Proposal to end ICE sales by 2030

Norway and Netherlands: Proposal to end ICE sales by 2035, Germany by 2030. Considerations for EU wide ban by 2030

Italy: Target of 30% penetration of electric vehicle sales by 2030

Israel: Proposal to end ICE sales by 2030

Mexico: Target of 30% penetration of electric vehicle sales by 2030

UK and France: Proposal to end ICE sales by 2040

All automakers are now actively developing EVs, with over $300bn committed from major carmakers

2022 2025 2030

Total annual vehicle production

10-12M

5-9m

1-4M

EV strategy timeline

VW group plans to invest more than $24bn in zero-

emission vehicles by 2030. Will develop 80 EV models by

2025, wants to offer an electric version of each of its

300 models by 2030

Chinese OEMs expected to

comply with 20% EV penetration rate ruling by

2025

PSA aims to develop at least 40 electric vehicles by 2025

Aiming to develop 8 EV models by 2025, with 30 panned by

2030Has set a target of two thirds of vehicle sales

EV by 2030

GM planning to introduce at least 20

EVs by 2023

Launching 12 EV models by 2022

Ford is planning to invest $11Bn in EVs by 2022, and will have 40 hybrid and full

EV models

Toyota has set a sales target of around 1m EVs

and fuel-cell vehicles (FCVs) by 2030, investment $13 billion to develop and

make batteries

BMW plans to deliver 12 pure EVs by 2025Daimler will bring 10

pure EVs to the market by 2022

Major passenger car and light duty vehicle OEM EV strategy announcements

BENCHMARK MINERAL INTELLIGENCE – LITHIUM FORECAST Q4 2018Page 3

© Benchmark Mineral Intelligence 2019 4

Electric Vehicle adoption rates will have the biggest impact on lithium ion battery demand over the forecast period. According to Rho Motion, EV sales are expected to reach 15.8m units by as early as 2025, which would equate to a 14.8% penetration rate. Our demand model includes upside/downside cases to this base assumption. Benchmark Minerals’ base case forecasts a 29% CAGR in lithium ion battery demand from EVs over the coming 10 years.

Electric vehicles

Passenger/Light Duty EVsA total of 96m passenger and light duty vehicles are expected to be sold in 2019 according to Rho Motion, less than 3m of which will be electric, rising to over 15m by 2025

Heavy Duty The use of lithium ion battery for heavy duty vehicles has been a major growth driver in EV demand and ebus and etrucks continue to experience healthy growth rates, supported by regional subsidies in China

Battery PacksThe size of battery packs continues to increase with improvements in pack technology. The average pack size for passenger and light duty vehicles is expected to reach an average of 40.9 kwh in 2019, rising to >50kwh by 2023

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4 | Q3 2019 Forecast


EV sales will continue to increase, fueled by over $600bn of investment in the supply chain – 2.8% forecast for 2019, 4.3% in 2020 and 14.8% in 2025

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70

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10099

2037

96

20352026

102

20342028

114

2027

Million units sold

2015

99

114

2016 2017

116

2018 2019 2020

116110

100

2021 2022 20252023 2024 2029 2030 2031

114

2032

111

2033 2036

105

2039 2040

9296

115

98

106

2038

109112 114 115 115 117 117

107

Total Electric Vehicles Sold - Base

Total vehicle sales world - Passenger car, light duty vehicles, buses and coaches Total Electric Vehicles Sold - Upside

Total Electric Vehicles Sold - Downside

Source:

83%

72%

61%

EV penetration rate by scenario

58%

51%

46%

35%

31%

23%2%

17%

15%

13%



Stationary storage

Growth of lithium ion battery demand from stationary storage applications is expected to accelerate through to the mid-2020s when growth rates will slow as markets become more mature. The cost and quality improvements in battery chemistry for EV applications will facilitate high penetration levels in a range of residential and commercial markets, despite lithium ion not necessarily being the most efficient technology to use in these areas. Benchmark Minerals forecasts stationary storage demand to grow at a CAGR of 38%, over the next 10 years, overtaking portable electronic demand by 2026.

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MWh demand

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Growth rate (%)

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Growth Stationery


Portable electronicsDemand growth rates from portable electronics have gradually slowed since the mid-2000s . While growth will continue from these markets the rate will be limited due to the maturity of key application markets. The existing split between natural and synthetic anode inputs into these applications is expected to remain relatively stable, with some increased use of silicon based anodes as the first steps towards commercializing silicon-dominant technologies.Benchmark Minerals forecasts a 4.3% CAGR in this market over the next 10 years.

46%Mobile phones

14%Power tools

40%Other portable

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Over 100 battery Megafactories are now in the pipeline as of October 2019 - with over 2 TWH planned by 2029

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25

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75

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Expected GWh battery cell manufacturing production through 2028 – major producers

2028 2023 2018 Active Capacity

Amid an environment of rising raw material prices 2014-2018, cell costs continued to drop. Making raw material costs more important.

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Average $/kWh for battery cell manufacturing – major producers Cell-level cost reductions mostly concentrated on:

▪ Cost management along materials supply chain

▪ Manufacturing efficiency improvements and large-scale production

▪ Yield loss improvements during manufacturing process

Pack-level cost reductions result from:

▪ Improved energy density of individual cells from chemistry evolution

▪ Improved cell density within packs from less volumetric intensity of interstitial materials

280

2014

120-130

2015 2016 20182017

16% price decline per year on average

Battery Cell Production Cost Curve 2023: 78 plants modelled covering NCM/ NCA and LFP technologies

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120

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300

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0900700 800500400 1,000

100

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20

6000

160

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50 150 250 350 550 650 750 850 950 1,050 1,100

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USD per kWh ( Real 2019)

Capacity GWh

China

North America

Europe

Asia (excl China)

Other

.NB: Panasonic is producing batteries for Tesla as part of a captive JV, no margin is added here.

Independent cost assessment of cell manufacturing plants.Excludes cost of land and depreciation of equipment is over 10years. Source: Benchmark Mineral Intelligence.

Current plans show high nickel NCM/ NCA dominating, but this may change as new formulations are proven

0%

10%

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70%

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100%

2016 2017 2018 2023 2028

NCM 111 NCM 523 NCM 622 NCM 811 NCA LCO LFP LMO / LMNO

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The blend of synthetic, natural and other additives creates significant differentiation in the anode

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

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100%

2025

2015

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Other SyntheticLTO MCMBSilicon Natural

Anode material selection remains a challenge in balancing cost and performance

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The natural vs synthetic graphite debate rages on

Most anode producers aiming for a mix of input raw materials to gain benefits from both

Price rises in H2 2017 helped the spherical graphite market gain traction

Supply chain concerns persist for natural anode materials

• Grade

• Environmental footprint

• Consistency of supply

Synthetic supply also a concern despite major attempts to increase production and efficiency in China

• Production timescales

• Capital intensity of expansions

• Environmental footprint

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Benchmarks new Anode report tracks capacity and announcements in the supply chain…

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Production and growth rates are included along with major precursor materials

All Raw materials require significant investment, and a price that will incentivize this production

1. Capex includes processing capacity to either a carbonate or hydroxide 2. Capex estimate includes processing to spherical uncoated 3. Cobalt is today, and is expected to remain in the long-term, a byproduct of nickel and copper production 4. Capex is average of Class 1 and NPI/FeNi production

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Primary nickel demand 2018-2030 (in 000s)

Cobalt demand 2018-2030 (in 000s)

Natural flake graphite demand 2018-2030 (in 000s)

Lithium demand (LCE basis) 2018-2030 (in 000s)

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0

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20302018

Battery Non-battery

▪ Substitution due to solid state battery adoption

▪ Confusion over role of synthetic graphite▪ Not seen as a core battery raw material▪ Environmental concerns

▪ 70% DRC raw material▪ (brand image, lack of western investors)▪ High cost/substitution▪ By-product▪ Near-term over-supply

▪ Quality & consistency of product▪ Lack of chemical experience▪ Lack of a futures price▪ Potential oversupply in

medium-term

▪ Historically low price ▪ Laterite challenges▪ Non-core assets▪ Recycling▪ Sulphuric acid supply

Challenges

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20302018

Battery Non-battery

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2018 2030

Non-batteryBattery

18.1%2.0% (Non-battery)21.4% (battery)

CAGR

Total Capex Required1

$24bn


CAGR

Total Capex Required2

$13bn


CAGRTotal Capex Required3: >$50bn combined in copper and nickel


CAGR

Total Capex Required4:$39bn

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0

40

60

2018 2030

Battery Non-battery

▪ Latin America▪ Australia▪ Europe▪ North America

▪ Africa▪ China

▪ Africa▪ North America▪ Brazil▪ China

▪ DRC, DRC, DRC▪ North America▪ Australia▪ Brazil

▪ Indonesia▪ Philippines ▪ Australia▪ PNG

Locations


Flake Graphite demand breakdown by end-use, 2018

Note: LTO - Lithium–titanate

142

Total Flake Graphite demand

Other demand

693

Battery demand

551

2018 ‘000 LCE tonnes

65%

32%

Stationary grid storage Electric Vehicles

3%

Other

35%

61% NaturalSynthetic

2%

SiliconMCMB

1%1%

Other

6%

72%

11%

5% Graphite shapes2%

CarburisationFriction products Lubricants

Refractory and foundry

Expanded graphite3%

1%

Carbon brushes

1%

Other uses

Final thought: Material qualification for new supply chains is an intense and often under-estimated process

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Qualification – the auditing process to ensure that material is fit for purpose before commercial supply commences

Example raw material qualification process and timeline – best case scenario

Does the material…

Concerns for OEMs

Quantity

… comply with spec? 10 – 50 KG1

… perform in anode? 100 – 500 KG2

… perform in battery cell?

1000 – 5000 KG3

… come from a reliable manufacturing line?

4

1 2 3 4 5 6 7 8

Month▪ OEMs must qualify large

quantities of new suppliers to create effectively large pool of available material to source

▪ Risk of qualification failure is high with new suppliers

Key Takeaways from the Crystal Ball:

▪ Anodes will make up the largest differentiator in battery performance post 2025

▪ Solid State will only reach mass light vehicle commercialisation post 2030

▪ Given the scale of investment and qualification lead times in automotive, the speed of technological adoption will slow

▪ Portable electronics will be a key proving ground for new technologies, while ESS is ripe for disruption

▪ Prediction: One of the more top ten OEMs will fail in the next decade


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Anode Supply Chain Forecasting - Quebec.ca