IIT LIB-related Study Program11-12 (August 2011)

Chapter 5 LIB Cell Materials Market Bulletin (11Q3)

This chapter presents CY11 market data on cathode and anode active materials, formulated electrolytes and separators, which are the main constituents of LIB cells. As we reported in the 11Q3 market bulletin in Chapter 4, the LIB market for portable devices will only grow 9% YOY (cell based) in CY11. The cylindrical cell market, centered on notebook computers, appears to be losing speed in Q3 and Q4, towards the end of the year. Materials procurement volumes for portable devices are being tightly throttled back, and an inventory adjustment is under way. In the automotive LIB market, on the other hand, the two big suppliers of pouch-type cells, Nissan/AESC and LGC, are steadily expanding production, and their materials procurement is also expanding strongly. However, the volume of materials taken in by automotive LIB suppliers does not match the materials demand volume calculated from the number of LIB cells per xEV and the number of cars produced. That might be because they are still in the production commissioning phase. The factors involved include low yield, longer lead times than in the consumer market, and test running of new lines, but in any case, materials demand will settle down once production stabilizes. We will present related data in Section 2.

1. Macro Moves in the Materials Markets in the 2000s

IIT has been publishing this study program since 2000, and we will now draw on that legacy to analyze movements in the market shares of Japanese manufacturers in the materials markets in the 2000s. For cathodes, anodes and formulated electrolytes, in particular, the rise of Chinese suppliers is startling, and it is not possible to cover all the suppliers. The reader should be aware that the shares for Japanese manufacturers might be calculated somewhat high as a result, but the trends can be observed. Incidentally, IIT takes the view that there is absolutely no need for a cell supplier or materials supplier to be Japanese, provided they can produce highperformance, high-quality, low-priced LIBs. The data we will present later are only intended to give an objective grasp of movements in the shares of Japanese manufacturers, and are not intended to examine the resurgence of Japanese manufacturers1. Figure V-1 shows movements in the shares of main LIB materials and the cells themselves for Japanese manufacturers. Powders and fluids are based on weight, sheets are by area, and cells are by number of cells. The cell-based share declined almost linearly from the 80% range in 2001 to the 50% range in 2006, and on to approximately 40% in 2010. The latest outlook in 2011 is for a total share of 36% for Japanese manufacturers and 40% for the two main South Korean manufacturers. IIT has been providing cell volume-based shares to Japans Agency for Natural Resources and Energy, sounding alarm bells from an early stage about Japans declining share of the battery and LIB industries. However, they had no quantitative figures about the materials market, so their perception was that cell manufacturers shares dropped, but materials manufacturers still have a high share. But, looking again at Figure V-1, it is clear that their perception has little basis in fact. In 2001, cell manufacturers had high shares of the three materials, other than separators, while Celgard had held a constant share from an early stage. In 2006, they maintained higher shares of all the materials, including separators, than they had of cells. That situation was changing in 2010. Their share was dropping particularly sharply in cathode active material and formulated electrolyte. On the other hand, Japanese
1 Even Sanyo and Panasonic drop the share for their No.1 vendors to 60% or less to survive as cell manufacturers. They are calling for an increased share of Chinese- and South Koreanmanufactured materials, and that is one of the main objectives of their relocation of cell factories to China.

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manufacturers have a surprisingly high share of anode materials, and they keep a high share of separators, as expected. Figure V-1 Movements in Shares of Main LIB Materials and Cells for Japanese Manufacturers

We will now take a closer look at the materials individually. Over the decade of the 2000s, cathode active materials added LMO and LNO to the previous LCO market, and NMC and LFP moved into full mass production from 2005. LCO and NMC account for 80% or more of the market, with the volume of NMC surpassing that of LCO in 2011. The main overseas materials are Umicore, who have their headquarters in Belgium (with factories in South Korea, China and Japan), and numerous local Chinese manufacturers. LCO, in particular, has established performance, quality and manufacturing methods, and can be produced by Chinese manufacturers, and the Japanese companies cannot compete with Umicores volume advantage. For NMC close to the basic mix of 1/3-1/3-1/3, the technology is as mature as it is for LCO, and the Japanese have no prospect of beating Umicore and the Chinese. While their share keeps dropping in cathode active materials, the Japanese manufacturers are putting up a surprisingly strong fight over anode active materials. They should be the hardest materials to make a profit on among the main materials, but the perseverance of the top companies, like Hitachi Chemical, Nippon Carbon
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and JFE Chemical, is helping to maintain the overall share. High-capacity 18650 cells of 2.6Ah or more require anode active materials compatible with high electrode density, of which MAG is the leading example2. Ube Industries, who were dominant in formulated electrolytes for a time with additives, have seen their share drop rapidly, and while Mitsubishi Chemical Corporation are putting up a good fight, South Korean and Chinese manufacturers like Chiel (their operations have now been taken over by Panax-Etec) and Zhangjiagang Guotai-Huarong are steadily increasing their shares. Once companies mainly develop their own additives and formulated electrolyte mixes, as SDI do, they do not expect much from the development abilities of formulated electrolyte manufacturers. A blender able to supply a certain level of purity and quality at the lowest price is good enough. In automotive cells, it is certainly desirable to the formulated electrolyte manufacturers factory nearby when assembly operations are spread across Europe and North America, as is the case with Nissan. The global expansion by Mitsubishi Chemical Corporation and Ube Industries is intended to meet that need. It is a simple strategy, but it has some chance of success. The Japanese share of separators rose once in FY06. The trend of the time in the portable market, putting the wet type on top with the dry type declining, was also a factor, and an emphasis on quality prompted a return to the Japanese manufacturers, at least until the string of accidents and recalls in 2007. After that, the Japanese gradually lost share, partly because SK of South Korea and some Chinese manufacturers entered the market. In automotive cells, Polypore (Celgard) are the main vendor for Nissan/ AESC and LGC for the time being. That brings them again into confrontation with Japanese manufacturers like Asahi and Toray Tonen.

2. Materials Demand for Automotive LIB Batteries

As we touched on earlier, the automotive market will be the main battleground in the struggle for share among LIB manufacturers and materials manufacturers in the 2010s. In the automotive LIB market, LEJ, LGC, and JCS started production in 2009, at very small volumes, and Nissan/AESC and LGC began full mass production in 2010, leading to 2011. As the data in Section 3 and beyond will confirm, the volume of procurement by Nissan/AESC, in particular, has reached the level of 1/4~1/3 that of SDI and Sanyo, the top groups in the portable market. For the Nissan BEV Leaf, that might be expected to be the material for the annual production of 40,000 Leaf cars in 2011, but the procurement volume is larger than that. Figure V-2 shows a calculation of materials demand, using the xEV production in 2011, the volumes of cells used in those xEVs, and taking yield as 100%. The material for 4,000 Leafs is at least 2,000t of cathode active material (LMO/LNO mix), at least 1,000t of anode active material, and approximately 12M m2 of separator. Those are substantial volumes, even if yields improve. Supplying materials for Nissan Renaults 500,000 BEVs a year is certainly attractive. LGC are the next biggest buyer after Nissan/AESC. Even if we only count supplies for the GM Volt, Hyundai Sonata HV and Renault Twizy, their procurement still reaches the minimum line for annual procurement, at 400t of cathode material (LMO/NMC mix), at least 200t of anode material and around 4.5M m2 of separator. These two companies will be doubling
2 For example, the anode for the 2.6Ah cell from Panasonic (CGR18650E, production now 2 terminated) had 8.5g of graphite, electrode density of 1.60g/cc, area density of 0.0132g/cm , porosity of 24.3%, and coating thickness of approximately 85 microns. Their latest 3.4Ah cell 2 (NCR18650B) has 11.7g of graphite, electrode density of 1.73g/cc, area density of 0.0171g/cm , porosity of 18.0%, and coating thickness of approximately 103 microns. The capacity density of active materials is approaching the limit, at around 370mAh/g, so the only ways to raise capacity will be to increase coating thickness and raise press pressure. The Japanese graphite manufacturers are the only ones able to handle those methods.

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their procurement volumes annually in 2012 and beyond. SBL and Sanyo will start full production in the second half of 2012. However, as Figure V-3 shows, demand for cells and their materials will not grow unless they are used in vehicles that actually sell. In any case, the state of progress in the automotive LIB market and materials market will have to be watched closely for the time being. Figure V-2 Materials Demand for Automotive LIB Batteries (100% yield case)

Figure V-3

Sales Performance of Major PHEV/BEVs

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Note) iMiEV includes the PSA C-ZERO/iOn, an OEM model.

3. Separators
The separator market in CY11 will be up 23% YOY to 454M m2. The structure of supply and demand between suppliers and cell manufacturers is basically unchanged (Figure V-4), but most notably, SK Innovation are aggressively expanding their capacity, and increasing their supplies to SDI and LGC. They supplied large volumes to LGC before, and recently they appear to have been capturing share of supplies to SDI from Toray Tonen. As Figure V-5 shows, they are coming up close behind the top three even in overall share. At the middle of 2011, their production capacity was 8-8.5M m2/month, and their shipments increased to 6.5M m2/month. With the imminent addition of two lines, they will have a total of seven lines in a production system for 12M m2/month. They plan to expand to 15 lines in future. Figure V-4 Supply and Demand Relationships for LIB Separators (CY11)

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Figure V-5

Supplier Shares of LIB Separators (CY11)

Asahi Chemical have already announced a plan, in March 2011, to expand their Hipore (wet type) production, and they will have a production system for 255M m2/month by 2013. They are also reported to have expanded the dry-type P/P equipment at their Moriyama factory. Next, Toray Tonen announced their next-phase expansion plan for their South Korean Gumi factory. The expansion (an investment of approximately JPY5 billion) will add 40M to the 30M m2/month that they put into operation at the start of 2010 (two systems). The figure appears to be counting the SBL Ulsan factory. Figure V-6 adds in the expansion by Polypore, which has not been officially announced, to show movements in the production capacities of the top four. Ube Industries are not included because their investments beyond their existing 60M m2/year have not been determined. They appear to be waiting to see the orders and production expansions for Sanyos xEV batteries and PEVE. The top four in CY11 have a combined share of around 76%, and their total capacity is, of course, enough to cover current demand. Further capacity expansion is in anticipation of the xEV market (in CY11, separator for xEV use only accounted for at most 5%). We can confirm from Figure V-2 that if 500,000 Leaf cars were produced, they would require real annual supply of 150M m2.

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Figure V-6

Movements in the Area Production Capacity of LIB Separator from the Top Four Suppliers

The price levels for separator for xEV LIB are currently at JPY150/m2 for PP single layer, and JPY40/m2 for alumina coating (if the buyers procurement is in the class of Nissan/AESC or LGC). The target for CY15 is still JPY100/m2, but the issue is whether or not there is a ceramic layer. Figure V-7 shows the usage of separators and ceramic layers in xEV LIBs. In pouch cells, which are getting larger, the common view is that PP has the advantage over PE, because of its superior form retention. Ceramic layers, on the other hand, cannot be described as essential, because the heat generation behavior in the event of a short between electrodes varies according to the electrode design. Nissan/AESC, who have almost decided to change to ceramic separator in their next model change, are an example of the manufacturers moving to apply new ceramic layers, but some others are very likely to opt for no ceramic layer in their next models3. Figure V-7 Usage of Separators and Ceramic Layers by Main Suppliers of Automotive LIB

Note) It is not clear whether Sanyo use separator with a ceramic layer or HRL.

4. Cathode Active Materials

The cathode active material market in CY11 fell far short of the initial forecast at 59,645MT, up only 9% YOY. The proportion for xEV use is higher than for other materials, at 8-9% overall, because of the inclusion of low-capacity LMO etc. The stagnation of the market as a whole was due to the impact of the slowdown in
3 In the consumer sector, Panasonics NCR18650 2.9Ah and 3.1Ah models have used an HRL on the anode and hybrid-type separator with an alumina layer, but the 3.4Ah NCR18650B will not have an HRL on the anode. They will continue to use hybrid-type separator.

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shipments for the portable device market. The changes in the state of the 18650 notebook computer cell market have had a particularly strong impact on the active material market. The share for 2.2Ah cells, which use almost only NMC, remains high, and there is little progress in the shift to high-capacity products of 2.8Ah and above. Therefore, LCO dropped below 20,000MT and the NMC share rose to 44% (Figure V-8). Figure V-8 Demand for Each Type of LIB Cathode Active Material

Note)

There is a discontinuity between data up to 2009 and data from 2010 onwards, due to a difference in the method for counting material from Chinese manufacturers.

Figure V-8 shows that the start of mass production of first-generation xEV LIB is scattering the cathode active material market, with a broad division between LMO, which is increasing, and five types, including LCO, which are declining. However, considering the second-generation xEV Libs, of which some could appear as early as CY13 and most will be around CY15, and the state of selection of leading suppliers, a considerable volume can be expected to converge on NMC. LNO is attractive for its high capacity density, but it can easily moisten even in a dry room environment, and the strongly alkaline Ni compounds generated can easily oxidize aluminum. It is not surprising that Toyota/PEVE are still having stability problems, even though they brought it into automotive cells in 2003 for the Vitz. The stability of LMO was necessary for first-generation models, but the downside is the low capacity. It was surprising that suppliers achieved the price of JPY1,500/kg already, but there will be a natural shift to NMC to raise the capacity of cells for BEVs. Sanyo, SBL, BEC and others are already using NMC alone (not as a blend like LMO/NMC), and it is very likely that Nissan/AESC and LGC will shift to NMC for their second-generation cells. Incidentally, IIT has been using NMC =three-element cathodes as a general name for Li(Ni1-x-yCoxMny)O2. It is not clear whether this is the general designation in the industry, but in Figure V-9 it includes all the types named by BASF, such as NCM111 and NCM-523. In fact, even in nominal NCM-111, the accurate ratio between Ni, Co and Mn is not exactly 1:1:1, and the amount of Li varies, depending on the manufacturers and users. We have yet to see any materials market data that separates materials by their Ni-Co-Mn ratios, and we have not collated any such figures. However, qualitatively speaking, a mix close to NCM-111 was the first to come onto the market, and it is said that there is a gradual shift to higher-capacity NCM-523. When BEV production reaches the one or two million a year level, resource problems will mean that the material will certainly have to have less Co. Global buried reserves of Co are said to exceed 7Mt, so there is no resource problem there, but the production volume of Co ore is still low, at 60,000t or less (for secondary cells, Japan uses nearly 10,000t a year, and if Japans consumption share is 40%, global demand would be 25,000t). Since Co started trading on the London Metal Exchange (LME), its market price has been moving stably at USD20/lb
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or less, but it is necessary to keep risks to the absolute minimum. If the material was NMC-523, Co demand would not go beyond 27,000t, even for production of 5 million BEVs (Figure V-10). Figure V-9 Main Three-element Materials

Note) From BASF report documents for the 2011 DOE Vehicle Technologies Annual Merit review. http://www1.eere.energy.gov/vehiclesandfuels/pdfs/merit_review_2011/electroche mical_storage/es013_thurston_2011_p.pdf

Figure V-10 Annual BEV Production and Comparison of Co Demand for Each NCM Material

IITs Author T can still not understand the incentives for LFP development, but at the start of July 2011, the Canada HQ, which holds wide-ranging LFP-related patents, announced that it would grant licenses to multiple companies, including Sumitomo Osaka Cement and Mitsui Engineering and Shipbuilding (Figure V-11). Both Sumitomo Osaka Cement and Mitsui Engineering and Shipbuilding are planning to build plants with capacity for 2,000Mt/year.

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Figure V-11 The Licensing Situation for Olivine-type Cathode-related Patents

Note) From the July 25th, 2011 edition of Nikkei Electronics

Sony use LFP cathodes in their 18650 cells for power tools, and in their 26650 cells for ESS. They trumpet the high safety and cycle properties of cells with LFP cathodes, but at the same time, Sony sources tell us of the difficulty of electrode design, and of manufacturing stable olivine coating. Nichia Chemical, who supply LFP to Sony, appear to have developed the highest class of LFP, both in the mix and in the process, but the Chinese manufacturers are having a particularly hard time. In China, it is only natural that even if stable cells can be produced as lab samples, there is frequent trouble in mass production. Figure V-12 compares the electrode densities and active material area densities of mass-produced cells using cathodes of LFP, LNO, and LCO/NCM. The voltage is basically low, so the volume of conductor material is high, which prevents higher density. This is an even greater drawback from the point of view of energy density. Figure V-12 Electrode Densities and Active Material Area Densities for Main Cathode Materials

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Figure V-13 Supplier Shares for LIB Cathode Active Materials (CY11)

Figure V-14 Supply and Demand Relationships for LIB Cathode Active Materials (CY11)

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5. Anode Active Materials and Formulated Electrolytes

There have not been many noteworthy developments in the anode and formulated electrolyte markets in the last half year, so we will just present the data in order. The size of the anode active material market in CY11 was 30,941MT, up 16% YOY (Figure V-15). Top-ranked Hitachi Chemical (Figure V-16) are increasing their sales of MAGX, which is inexpensive and suitable for consumer cells, and with the start of full-scale shipments of MAGX for the Nissan Leaf, it has surpassed their NG-based
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artificial materials. Nissans electrodes are produced in Japan by NEC up to annual production sufficient for 10GWh, so the Yamazaki factory is the main center for MAGX production. Following on from their JPY2 billion investment in FY2010, they are adding two more lines (a JPY3.5 billion investment), aiming to put them into operation in September 2012, for a four-line production system. They are building post-processing factories for MAG and MAGX in China to serve the factory developments of the Sanyo-Panasonic Group. They seem to be ready for anything in their struggle to keep the top place, ahead of BTR, who are growing rapidly, mainly from supplies to SDI. Figure V-15 Supply and Demand Relationships for LIB Anode Active Materials (CY11)

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Figure V-16 Supplier Shares for LIB Anode Active Materials (CY11)

Of course, Hitachi Chemicals good performance is the benefit if Nissan/AESC setting up production steadily, but their aggressive business development, based on
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the prospect of expanding xEV demand, carries major risks. In contrast to separators, there are many anode material manufacturers, and there are different designer preferences for natural or artificial graphite, HC and SC, so it is difficult for an anode material manufacturer to put together a portfolio that will capture many customers. Kurehas HC is used by EnerDel, BEC, HVE, LGC, AESC, and others, but EnerDels production is stagnating, partly because of the collapse of TH!NK. BEC and HVE have very small production volumes, AESC are only supplying the Fuga HV, and LGC have already switched to SC for HEV use. Kurehas HC has many steps in its production process and is not highly profitable, so the price of JPY2,000 or more is the bottleneck. The president can personally call for maintaining the high price, but perhaps he does not know that the market will expand when the price of a highperformance material comes down. On the other hand, Showa Denko have started supplying samples of SCMG-BR, with JPY1,000/kg as the target price. They aim to expand their Omachi factory to a production system for 3,000Mt/year even within 2012, and achieve both high performance and low price. They are expecting to capture some large-scale users. Mitsubishi Chemical Corporation have the top volume in the formulated electrolyte market, but in the South Korean and Chinese markets, local manufacturers are growing with remarkable speed. They include Panax-Etec (who have taken on Chiels operations) and, in China, Zhangjiagang Guotai-Huarong, Shenzhen Capchem Technology and Jinniu. Mitsubishi Chemical Corporation and Ube Industries will take the opportunity of expansion in the xEV market to make a global expansion and resist the South Korean and Chinese manufacturers. As they have already announced, Mitsubishi Chemical Corporation will build a global four-center production system, in Britain (10,000t/year, fall of 2011), the USA (10,000t/year, summer of 2012), China (10,000t/year, building a factory in Changshu, Jiangsu province to start production at the end of 2012) and Yokkaichi, Japan (factory expansion to 13,500t/year in February 2012). Ube Industries will expand their Sakai factory to produce 10,000t/year (start of 2012) and, through their merger with Dow Chemical, they plan to have plants with capacities of 5,000-10,000t/year in the USA (Midland, Michigan, end of 2012), China (outskirts of Shanghai, end of 2012) and Spain (2013 or later). Mitsubishi Chemical Corporation aim for a global share of 40%, while Ube Industries aim for 50%, which is splendidly ambitious, but this volume strategy does not necessarily make sense. Once the mix and additives for LIB formulated electrolytes for xEV have been determined, it is difficult to change them, because of long-term warranty complications. Also, the Nissan factories in the USA, Britain, France, and Portugal, the LGC factories in the USA and China (to be determined), the SBL factories in Europe (to be determined), and others could surpass the sizes of the Japanese and South Korean factories. They would certainly need local suppliers of formulated electrolyte. Figure V-17 and beyond present basic data on the formulated electrolyte market, but there is potential for major changes in 2012 and beyond. Finally, Tomypure, who suffered severely from stoppage at their Okuma factory from the Fukushima reactor disaster, have announced that they will build a new factory in Kashima, Ibaraki prefecture, investing JPY5 billion to resume formulated electrolyte production in April 2012. Tomypure have a solid reputation for high-purity formulated electrolyte technology and production, and in closing this chapter, we want to cheer them on.

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Figure V-17 Supply and Demand Relationships for LIB Formulated Electrolytes (CY11)

Figure V-18 Shares for Each Supplier of LIB Formulated Electrolyte (CY11)

(End of Chapter 5)
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