LFP Cathodes — Made in Morocco, Financed by China, Exported to the West

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Looks like there is more than one way to skin a cat. The USA has effectively locked out Chinese batteries from its domestic market, but what if components like LFP cathodes are made in Morocco, in a factory financed by a Chinese–Korean partnership? Sounds complicated, but it might just work, as Morocco has a free trade agreement with the US. It is also very convenient for exports to the European Union — just “across the ditch.”

As well as a free trade agreement with the US, Morocco has low labour costs, the largest reserves of phosphate in the world, a business-friendly environment, and abundant solar energy. The North African country also hosts a vehicle manufacturing base for Stellantis, among others.

“LG Chem has announced that it will be investing in a lithium-iron-phosphate (LFP) cathodes facility in the North African country of Morocco in partnership with Youshan — a subsidiary of China’s Huayou Group which also includes major cobalt supplier Zhejiang Huayou Cobalt,” Rethink Energy writes. “LG Chem has also committed to working with Zhejiang Huayou Cobalt on manufacturing plants in Morocco and Indonesia in a separate statement which includes a lithium conversion facility in Morocco and two facilities in Indonesia. LG’s plant with Youshan will initially produce 50,000 tons of LFP cathodes material annually, enough for half a million entry-level battery electric vehicles (BEV) in the passenger vehicle market. The total investment value for these four announcements has not yet been disclosed.”

Huayou describes itself as “Rooted in China, making friends all over the world.” The company has only been around for 20 years and appears to be making rapid progress globally. The company has already partnered with LG chem to build a plant in Indonesia. Indonesia is encouraging investment in the country as it seeks to move its vast nickel reserves further up the value chain — moving from exporting ore, to exporting batteries, to building an electric vehicle industry.

Huayou’s newest friend is Morocco, where it joins a growing number of Chinese battery and electric vehicle companies expanding overseas to get closer to their foreign clients.

Huayou Cobalt is also partnering with LG Chem to build a lithium conversion plant in Morocco. This conversion plant will extract lithium hydroxides and lithium carbonates. Both of these are essential for producing cathode materials. Production is expected to start in 2025 with an annual capacity of 52,000 tonnes. In addition, LG Chem said it plans to build two other facilities in Indonesia — a precursor plant with an annual production capacity of 50,000 tonnes and a plant to extract mixed hydroxide from nickel ore for precursor production.

“We will actively respond to the emerging LFP cathode material market with the Morocco plant as our global base. Our goal is to create a strong, vertically integrated material supply chain — flowing from raw materials to precursors and cathode materials — and solidify our status as the world’s top comprehensive battery materials producer,” said LG Chem CEO Shin Hak-cheol.

According to Reuters: “LG Chem said LFP cathodes produced at the Morocco plant will be supplied to the North American market and could be eligible to receive subsidies from the U.S. Inflation Reduction Act (IRA) as Morocco is a free-trade partner with the United States.”

The IRA requires at least 40% of the value of critical minerals used in an EV battery to be sourced from the USA or a free trade partner to qualify for a $3,750 tax credit per vehicle. Both South Korea and Morocco have such a free-trade agreement with the USA.

Huayou and LG Chem are following in the footsteps of China’s Gotion, which recently stated that it is planning to build a 100 GWh battery manufacturing facility in Morocco. This plant would be the largest in Africa or Europe.

Rethink Energy predicts that “the European market will soon be begging for LFP cathode material manufactured outside of China as electric vehicle demand ramps up.” Supply should be available for both the US and European markets by 2026, but at this point in time, geopolitical pressures have led to higher demand from US manufacturers. The plant aims to produce 50,000 tonnes of LFP cathode materials per year. This would be enough to power half a million entry-class EVs with a 350 km range from a 50-kilowatt-per-hour battery. LG will expand from LFP to LMFP (lithium-manganese-phosphate-iron) cathode materials. Adding manganese to the mix will provide more capacity and better output than LFP cathode materials.

Rethink Energy believes that the deal will be structured in a similar manner to “Ford’s deal with CATL for its $3.5 billion Michigan plant in that Ford will license the necessary IP from CATL in order to avoid ‘entity of concern’ provisions in the Inflation Reduction Act (IRA). Even if Youshan/Huayou Group takes an ownership stake in the company, we can safely believe that it will be majority owned by LG, as otherwise it would certainly fall foul of IRA requirements for subsidy.” Global businesses seem able to adjust to make sure that they get the greatest benefits from skinning the cat!

Morocco’s position geographically and politically allows the country to become a major hub for battery (LFP and LMFP) and precursor manufacturing facilities to supply both the US and Europe. Morocco has a long history of mining, and significant reserves of phosphate, cobalt, and iron ore. There do not appear to be large reserves of manganese in Morocco. However, the African continent hosts 3 of the top 10 countries in the world with reserves of the mineral — South Africa, Ghana, and Gabon. China has the largest reserves of manganese in the world.

Those who would seek to cast shade on the rEVolution have insisted that there are not enough minerals to make the necessary batteries — this straw man argument has been roundly trounced by the Australian mining industry alone.

The next argument will now be advanced — that there are not enough factories making the batteries. This argument will not hold up long either. Research by the EDA has shown that announcements of investment in battery manufacturing in the USA have the potential to more than meet the demand there. Morocco’s imminent entry into the supply chain of cathodes will only increase supply for Africa, the USA, and Europe.

Morocco is well placed to become a renewable energy and electric vehicle powerhouse in the global transition to renewable energy and the electrification of transport.

Featured image by Walkerssk from Pixabay

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David Waterworth

David Waterworth is a retired teacher who divides his time between looking after his grandchildren and trying to make sure they have a planet to live on. He is long on Tesla [NASDAQ:TSLA].

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