Volkswagen to set up battery plant in Canada to step up North American strategy

German carmaker Volkswagen has chosen to establish its first North American battery cell plant in Ontario, Canada, due to the growing importance of the region’s e-mobility market share, it said on Monday March 13

The automotive group’s battery business, PowerCo, will establish the plant for unified battery cells in St Thomas, with the intention of localizing its supply chains. Commercial production was scheduled to begin in 2027.

As part of its growth strategy in North America, the German company will also establish a plant for the manufacture of electric-power pickups and SUVs in the US state of North Carolina.

The choice of Canada for its first overseas battery plant is aligned with a memorandum of understanding signed in August 2022 with the government of Canada, with the intention of fostering the creation of a battery ecosystem in the country to support its uptake of e-mobility.

The carmaker said that the availability of key raw materials in Canada was another reason for the site’s selection.

Lithium is a key ingredient in the rechargeable batteries that are essential components in electric vehicles (EVs), and Canada has large deposits of hard-rock spodumene and brine-based lithium resources.

The Canadian government has identified lithium as a critical mineral because it is a key material in the renewable energy transition, and because Canada has the potential to be a significant supplier. Several companies were working to develop lithium projects, ranging from traditional hard-rock mining to unconventional sources such as oilfield brines and industrial wastewaters.

The progress of these projects ranges from early exploration to a pre-production stage.

For instance, Sayona Québec is a joint venture project between miners Sayona Mining and Piedmont Lithium. It plans to restart production at the spodumene-based North American Lithium (NAL) asset in Quebec, Canada. In June 2022, a formal agreement to that effect was announced by Sayona Québec and Piedmont.

This will ultimately include the development of a spodumene conversion facility at NAL to produce lithium hydroxide or lithium carbonate, in line with the company’s agreement with the government of Québec to develop a local downstream processing capability close to the North American battery market.

Lithium prices bottomed-out in 2020 but have since risen thanks to a revival in demand from the downstream battery sector for EVs.

Still, prices have retreated globally in recent pricing sessions, reflecting weakness in the most liquid Chinese domestic market.

Fastmarkets’ daily assessment of the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices, cif China, Japan & Korea, was $58-63 per kg on Monday March 13, down by 1.63% from $58-65 per kg the previous Friday but up by 51.25% compared with $39-41 per kg at the start of January 2022.

In the Chinese domestic market, participants highlighted the temporary sluggishness in the EV sector as a reason for the thin demand for lithium salts. Cathode producers said that they were not receiving any new orders from battery producers, diluting demand for upstream lithium salts.

Keep up to date with the latest news and insights in the lithium market by visiting our dedicated lithium page.

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