Last week, the US International Trade Commission (ITC) proposed a 10-year import ban on South Korean battery producer, SK Innovation, after the conclusion of an IP lawsuit filed by fellow South Korean battery maker, LG Chem. This decision to ban imports essentially cuts material supply from two factories with a combined capacity of almost 22GWh (9.8GWh and 11.7GWh respectively), expected to commence production in 2022 and 2023. However, there is still an option of local material sourcing, though there are limited opportunities to source the required materials, such as active cathode materials domestically within the USA at the scale required.
Roskill View
Roskill’s analysis shows that in 2020, the USA accounted for 1% of the global cathode materials market, which is forecast to increase to around 5% by 2030. The legislation passed by the US ITC, however, maintains SK innovation’s ability to supply battery cells to Volkswagen’s MEB line in North America for two years and Ford’s F-150 for four years, in addition to supplying spare parts for Kia models. Considering sales/production levels of Ford and Volkswagen in USA, Roskill estimates SK Innovation’s potential market size to be 9GWh through to February 2023, falling to 3GWh until February 2025, as potential to supply VW’s requirements expires. As a result, it seems unlikely for SK Innovation to invest further capital and time developing and commissioning its two USA based factories, only to achieve production of battery cells for 2-3 years at 14% planned utilization rate.
SK Innovation announced plans for additional investment in its U.S. battery business, following approval by the SK Innovation Board of Directors to fund the start of construction of a second electric vehicle battery plant in Georgia. READ MORE: SK Innovation Increases Planned Investment in U.S. EV Battery Business to $2.5 Billion (electriccarsreport.com)
The removal of 22GWh of pipeline production capacity would represent a 10% decrease in total giga-factories capacity in North America in 2023, while EV demand in North America is expected to triple in the next five years and requires nearly 75GWh in installed battery capacity. As a result, the ITC’s decision, if not reversed or altered, would negatively impact the supply of Li-ion batteries for EV applications in the USA. The absence of SK Innovation would also place greater reliance on other battery makers in the USA, including Tesla/Panasonic, LG Chem and Envision AESC.
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