Ford’s new LFP plant marks expansion of chemistry in NCM-dominant US market
US automotive manufacturer Ford’s announcement that it would invest $3.5 billion to build a lithium iron phosphate (LFP) plant in the US state of Michigan marks the chemistry’s adoption in a nickel cobalt manganese (NCM) dominated market
The US is considered a key market for nickel cobalt manganese (NCM) chemistries because of its performance in cold weather and American drivers’ tendencies to drive longer ranges due to the region’s geography.
Ford’s diversification of its battery chemistry would help the company reach its targeted annual run rate of more than 2 million electric vehicles (EVs) by the end of 2026.
“We’re delivering on our commitments as we scale lithium iron phosphate (LFP) and NCM batteries and thousands, and soon millions, of customers will begin to reap the benefits of Ford EVs with cutting-edge, durable battery technologies that are growing more affordable over time,” Jim Farley, Ford’s president and chief executive officer, said in the announcement on Tuesday February 13.
While the plant is expected to begin production in 2026, the company said having a diverse and localized battery supply chain would help consumer access more affordable EVs.
Availability and cost
One of the main reasons the automaker is focusing on LFP is due to lower costs and available supply of battery raw materials.
Ford has already laid out the groundwork for its lithium supply, signing a binding offtake with producer Ioneer in Nevada and a non-binding memorandum of understanding (MoU) with Compass Minerals in Utah.
The US Inflation Reduction Act is also one of the driving factors behind the securing of domestic supply of critical minerals, requiring 40% of EV battery materials to be sourced in the US or from countries the US has free trade agreements (FTAs) with.
In addition, there is the matter of cost. Nickel and cobalt prices hit record highs in 2022, and although they have come off from those highs, they remain more expensive than lithium.
“LFP batteries are very durable and tolerate more frequent and faster charging while using fewer high-demand, high-cost materials. This lower-cost battery, at scale, will help Ford contain or even further reduce EV prices for customers,” Ford said in the announcement.
The three-month price of nickel on the London Metal Exchange, for example, closed at $25,990 per tonne on Wednesday, up from $23,370 per tonne on the corresponding day last year. The price also briefly touched an all-time high above $100,000 per tonne in March 2022.
And Fastmarkets assessed the price of cobalt standard grade, in-whs Rotterdam at $15.00-16.35 per lb on Friday, unchanged from the previous session and down from its 2022 high of $39.75-40.50 per lb on May 3.
“Ford is reducing costs because it’s removing nickel and cobalt, and lithium is more accessible,” said Jordan Roberts, Fastmarkets Research battery raw materials analyst.
Lithium prices remain close to record highs, with Fastmarkets’ assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices, cif China, Japan & Korea reaching $69-72 per kg Thursday, down by 10.75% from the start of the year.
Fastmarkets Research forecasts lithium carbonate prices to average $63.50 per kg in 2023 and $59.00 in 2024, pushed down with more supply expected to come online in the coming years. Lithium supply and demand is forecast to flip to a surplus of 39,400 tonnes lithium carbonate equivalent in 2024.
Still, market participants said that although forecasts mostly expect more supply to come online, lithium projects have faced delays when it comes to producing supply on schedule.
“You are getting to a point where you’re banking a lot into lithium and if the projections are realistic, they are super bullish,” said a battery raw materials market participant. “I don’t know if they can produce that much, but in the short term we don’t see a lot of lithium coming.”
Growing market share
Ford’s development in the LFP market is in line with Fastmarkets Research’s passenger EV chemistry outlook, which expects LFP to have around 35% of the market share by 2029, up 6% from 2023.
Part of that increase of market share, particularly outside of China, where LFP is the dominant chemistry, is because of expiring patents.
“The patents on Chinese LFP technology are up, that’s now ceased and more manufacturers outside of China can use that,” Roberts said.
According to a paper from the Institute of Electrical and Electronics Engineers, the last of three patents that control LFP production outside of China expired in 2022.
Ford has also partnered up with CATL, leveraging the Chinese battery producer’s expertise to manufacture LFP cells in the US.
Despite the increase of LFP market share, Fastmarkets Research expects nickel cobalt chemistries, which include nickel cobalt aluminium, high nickel NCM and high manganese NCM, to make up around 62% of the market share by 2029, down roughly 8% from 2023.
“I still think NCM is going to be the winner in Europe and the US,” Roberts said. “It has a lot to do with cold weather performance, if you’re in the Midwest or Scandinavia where it gets to negative temperatures, you’re going to need NCM.”
Even if battery chemistries reduce their cobalt content, demand would be supported by more units produced using low cobalt chemistries, he added.
The US automaker also said it is trying to manage exposure on metals with environmental, social and governance (ESG) issues and switching away from NCM.
“LFP battery technology helps reduce reliance on critical minerals such as nickel and cobalt and is in line with Ford’s work to create an EV supply chain that upholds its commitments to sustainability and human rights,” the company said.
Market participants, particularly those in the NCM sector, said LFP chemistries also have its own issues regarding sustainability.
“The other thing I heard doesn’t work well is that the recycling value of LFP is close to zero,” said a second battery raw material market participant.
LFP’s poor recycling value is expected to be a temporary challenge according to Julia Harty, Fastmarkets Research battery recycling analyst. The economics of LFP recycling is expected to improve as more LFP batteries enter the recycling feedstock, she added.
“At the moment, the economics of recycling LFP are worse than other battery chemistries, but with LFP production on the rise, especially in China, recyclers will be keen to find a way to use LFP feedstock,” Harty said.
Lithium mining also faces its own set of ESG challenges, such as water usage rights, mining sites’ effects on wildlife and other environmental risks.
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