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26 October 2022

Trafigura to process 7k tons Cobalt for US, DoE hands out $2.8bn

The world is scrambling to re-build supply lines for US-centric battery materials this week, with mining and minerals giant Trafigura and EVelution Energy, joining hands to make a US-based battery metals company, signing a deal for Cobalt this week. At the same time the US Department of Energy has committed $2.8 billion to help some 20 companies augment their existing supply chains for lithium, graphite, and other battery materials processing build outs.

Singapore’s Trafigura and the US’s Evelution Energy kicked it off by signing a Memorandum of Understanding (MoU) to build a cobalt sulphate processing facility in Arizona, USA.

At full capacity the plant will output 7,000 tons of battery grade cobalt annually, helping to satisfy the growing demand for electric vehicles within the US. The companies claim that this could satisfy 40% of the US’ cobalt demand in 2027. Evelution aims to begin construction of this facility in late 2023 and although it does not mention a completion date, these typically take 12 to 18 months to build.

Meanwhile the Bipartisan Infrastructure Law (BIL) is distributing $2.8 billion in grants to companies throughout America to accelerate and relocate the battery supply chain towards the Americas. While the Trafigura deal is not be directly supported within the BIL, it is a solution to the same problems. In total the BIL allows for over $7 billion to be spent in this way and all of the plants will open up jobs in or near poor and disadvantaged communities.

Deals were announced for developing enough battery-grade lithium to supply approximately 2 million EVs annually, and graphite for 1.2 million EVs, nickel for around 400,000 EVs and the manufacture of tons of LiPF6 electrolyte. Another grant is for making 45% of the domestic demand for binders for EV batteries by 2030 and creating the first commercial scale domestic silicon oxide production facilities to supply anode materials for  600,000 EV batteries a year.

The money will also go towards building the first (LFP) lithium iron phosphate cathode facility in the United States.

Currently 80% of the world’s cobalt is refined in China, which shouldn’t come as a surprise considering the country’s iron grip on battery manufacturing. Over 90% of the world’s electric vehicle (EV) battery manufacturing is handled by East Asian companies, at the end of the first half of this year CATL alone had a market share of 31% – with no other individual companies coming close.

The Inflation Reduction Act (IRA) continues to be the main driving factor for most raw material deals and the attempted relocation of the battery supply chain to American soil. Significant tax credits for EV production will be available to companies that abide by domestic manufacturing and sourcing requirements, but China’s historical dominance over the battery supply chain means a mass-migration will be necessary for manufacturers and suppliers to abide by these rules. The Trafigura announcement is definitely not the first of these deals and it won’t be the last.

What makes that particular deal interesting is the sheer volume of cobalt that is set to be produced at this facility, 7,000 tons annually – an absurd amount of what is an incredibly valuable metal with a variety of uses within high-end manufacturing. Most of this will be going to the production of nickel manganese cobalt (NMC) batteries destined for use in EVs.

But for a long time now, cobalt has been a necessary evil within EV production, and efforts to move away from the metal have been significant. This is because the metal is both a financial and social nightmare, as it costs $52,000 per ton and a majority of global feedstock comes from mines in the Democratic Republic of Congo (DRC) that carry significant humanitarian concerns.

The desire to move away from cobalt hasn’t slowed down in recent years, Tesla has notoriously designed different battery chemistries in pursuit of lower cobalt concentrations, opting to increase nickel proportions to accommodate. Other chemistries like lithium iron phosphate (LFP) aim to eliminate cobalt requirements altogether.

So the question is, will the Trafigura plant go on to produce more than 40% of US cobalt demand? If it does, that’s quite a killing.

No company buys cobalt because it wants to. Even if the social issues can be avoided through sourcing from somewhere like Canada, the cost issue will continue to be a thorn in the side of battery producers and could even worsen as a result of limiting feedstock sourcing to better suppliers.

One issue with this is that Americans prefer larger vehicles, which need more energy dense batteries, which in turn incentivizes high-cobalt batteries as these remain the most energy-dense option which are suitable for EVs.

China has been able to reduce its dependence on cobalt supply through significant investment into LFP batteries, this has enabled it to produce EVs with very cheap batteries and accelerate its progress towards vehicle electrification. These vehicles don’t resemble what is sold in America, some of which more closely resemble a golf cart than they do a sedan or an SUV.

The US in particular love SUVs, and this additional size and weight introduces problems for less energy-dense batteries as the weight issue compounds with the introduction of batteries. This is going to be the main factor keeping cobalt demand in the US alive, as manufacturers are effectively forced towards higher density NMC batteries to satisfy demand as consumers demand high range batteries in comically large and inefficient vehicles compared to Europe and China.

Includes $149 million to : Albemarle, to go with its own $225.8 million to process lithium cathode materials; $57.7 million to American Battery Technology to make lithium hydroxide (LiOH) from unconventional Nevada-based lithium-bearing sedimentary resources; $50 million for Amprius to go with its own $140 million to prove a process for silicon nanowire anode technology; and $117 million to Anovion to go with its own £294 million to build a factory to make 35,000 tons a year of synthetic graphite anodes.

Read the rest of the DoE deals here.