Proposed Finnish LFP cathode plant expands Europe’s battery value chain

Competition with Asia to bring the battery value chain to Europe intensifies as mining company Finnish Minerals Group and battery cell manufacturer Freyr Battery explore the possibility of producing LFP cathode material

LFP cathode material - based on lithium, iron and phosphate - is needed especially in large-scale energy-storage battery segment and is used for battery packs in electric vehicles (EVs) with short driving ranges.

Nickel cobalt manganese (NCM) chemistries dominate the Europe and US markets, accounting for around 70% of all EV batteries. In China, though, LFP battery chemistry accounted for more than 80% of all new EV sales in 2022.

The durability, speed of charge and lower-cost components in LFP batteries make them an attractive alternative to NCM, as does the fact that - despite a current dearth of recycling options - they are less exposed to metals including nickel and cobalt with environmental, social and governance (ESG) issues.

“LFP is more thermally stable than NCM [battery chemistries] and is not affected by ESG or supply concerns that come with nickel and cobalt. Most importantly, its low cost makes it ideally suited for entry-level EVs,” Muthu Krishna, Fastmarkets’ battery manufacturing cost analyst, said.

Finnish Minerals Group and Freyr Battery signed a joint development agreement to assess the feasibility of establishing an LFP cathode material works in the Finnish city of Vaasa, they said on Thursday February 16.

The companies aim to establish a joint venture upon successful completion of preliminary phase studies and receiving investment approval, they also said.

“We clearly see that both the NMC and LFP battery value chains need to be built in Europe as the technologies complement each other and there is demand for both, depending on the final application.” Finnish Minerals Group chief executive officer, Matti Hietanen, said.

“We are closely following the EU debate on how to secure internationally competitive framework conditions for the battery industry in Europe,” Hietanen added.

“We have also seen other OEMs such as Tesla and Ford commit to using LFP - it’s clear that LFP will play a key role in the transition to e-mobility this decade if we are to see mass adoption of EVs,” Krishna added. “Therefore, this announcement to develop LFP cathode material in Europe is a crucial step in localizing supply chains and reducing reliance on China, which has historically dominated LFP production.”

Since these types of projects are very capital intensive, government support is needed to secure their development. The collapse of the Britishvolt gigafactory project in January highlights the difficulty of getting new EV projects off the ground without firm state backing.

“Start-ups have a lot of challenges so it is not surprising that some fail, especially if they are starting from scratch,” William Adams, head of battery raw materials research at Fastmarkets, said about Britishvolt’s collapse.

“They need the know-how and the equipment to build the production lines at a time when many other battery factories are also being built or expanded,” he added. “And they need to lock in a supply of battery raw materials, again at a time when many others want to secure supply, too.”

The race is on to secure battery materials for the future

Fastmarkets’ research team highlighted how Europe is competing fiercely at a global level to secure raw materials critical to its energy transition goals to feed its nascent battery value chain.

Lithium - a key component in the production of rechargeable batteries for EVs - has been in a supply-demand deficit for the past two years and is set to record a 14,300 tonne deficit in 2023, Fastmarkets’ research team predicts.

A revival in demand from the downstream battery sector for EVs has propelled prices dramatically higher over the past two and a half years.

Fastmarkets’ weekly assessment of the lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 410,000-440,000 yuan per tonne on Thursday, down by 21,000-35,000 yuan per tonne from 445,000-461,000 yuan per tonne on February 9 but up from a multi-year low of 37,000-41,000 yuan per tonne in July-October 2020.

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