China is in big trouble with "EU Batteries Regulation" which comes into full force in 2025.(I actually posted a lot of info about this issue on my
Post #: 73231359 on Apr. 8 2024)
This is serious guys. (Very good for us but bad for the Chinese).
I mean
the implications of EU's Batteries Regulation which is coming into full force in 2025 for China is going to be very serious. EU announced the regulation in July 2023 with its timeframe but there was no immediate impact for the manufacturers even in 2024. However it was obvious that it was going to be a major impact in 2025.
This is really serious guys.
The new EU Batteries Regulation 2023/1542 covers the whole lifecycle of batteries from production to reuse and recycling.
The battery manufacturers will basically have to get a Battery passport for their batteries.It sets out new obligations for manufacturers depending on the battery type, such as:
Carbon footprint declaration: (most important part)Encouraging
the use of low-carbon technology in battery manufacturing to support the EU's goal of achieving climate neutrality by 2050.
Due diligence disclosures (Responsible sourcing): (2nd most important part)Promoting the
responsible and ethical sourcing of battery materials by setting minimum requirements for supply chain due diligence disclosures.
Extended producer responsibility (EPR): (very important)Reinforcing the
obligations of battery producers by holding them accountable for the environmental impacts across the lifecycle of their products.
Recycled content requirements: (Another serious issue - A big topic to talk about separately)
Aiming to reinforce the
recycling and collection of batteries by establishing higher recycling targets and implementing an efficient take-back system for waste batteries
Sustainability:Seeking to ensure the sustainable design and production of batteries for;
- Performance and durability requirements:
- Removability and replaceability obligations:
- Labels with information on capacity and duration of use, etc.
See EU Batteries Regulation timeline below. The new regulations will come to full force very soon.
"European Union Adopts a New Batteries Regulation" July 25 2023
"New EU Batteries Regulation: what it means for manufacturers" Dec. 8 2023
"Navigating the New EU Batteries Regulation: A Roadmap for Manufacturers"Aug.23 2024
The timeline below provides a non-exhaustive overview of deadlines set out in the EU Batteries Regulation. (Red marking and writing are mine)
The countdown is on..!
Now we are coming to the end of 2024.
Do you think the Chinese battery and EV producers are already ready to comply with western regulations in 2025 and beyond if they still;producing lithium from lepidolite and other high carbon footprint resources, without responsible and ethical sourcing, without caring about environmental impacts,without caring about performance and durability requirements?This regulation is nothing to do with the increased customs tariffs for the Chinese EVs. It's coming as another hurdle on top of the high customs tariffs. ESG credentials are also coming on top all these hurdles for the Chinese.I will talk about it later on.
LTR has the best ESG credential and very low carbon footprint for its lithium spodumene concentrate as you know. (60% plus energy is coming from renewables)
Not many people paid any attention to EU's Batteries Regulation implications for China. But I can tell you clearly that;
CHINA WON'T BE ABLE TO SELL ANY OF ITS LFP BATTERIES (produced from lepidolite mines) TO EU MARKET BECAUSE OF VERY HIGH CARBON FOOTPRINT OF LFP BATTERIES. I believe the US too will bring similar regulations soon.
China will have to close most of its LEPIDOLITE LITHIUM MINES and REFINERIES. That's why CATL has already closed it key lepidolite mine IMO.CATL might be still keep that mine producing at little loss because it's be keeping the lithium price down. However CATL already has some other lepidolite mines producing for it. They can use that dirty lithium coming from those mines for making batteries to sell to its own market and third world countries in Asia-Pacific, Africa, South America and Middle East. However the volume of those sales can't be compared with the volume of sales to the Western markets.
Also CATL is the largest battery producer int he world by a 37% market shares. BYD comes after that by 15% share but not even close. So, CATL as a market leader, supplying to Tesla, BMW, Mercedes-Benz, Ford (gigafactory JV), etc. CATL also targets to supply EV-Truck market and works with Daimler Truck Holding AG, Volkswagen Commercial Vehicles and Volvo.
That means CATL is world's leading battery provider and has to comply with EU Batteries Regulation.
WHAT ABOUT BYD WHICH IS THE 2nd LARGEST BATTERY & EV PRODUCER? BYD is not the same for now but it will also have to comply with EU Batteries Regulation if it wants to sell its EVs in the EU. BYD sells most of its EV production inside China, however it's now increasing its EV exports to many other countries. We can see BYD started setting up EV factories in developing countries like Thailand, Türkiye, etc. But that would not be enough for BYD to increase its sales volumes in these countries.
THE EU AND US MARKETS ARE THE LARGEST IN THE WORLD, BUT GETTING SMALLER FOR THE CHINESE MANUFACTURERS Therefore both CATL and BYD have to increase their sales in these large markets. While Tesla is the best selling EV in both EU and US markets, CATL and BYD can't be idle or these markets.
Those companies making production in China, certainly including CATL and BYD didn't care about carbon footprint and ESG credentials so far. They just increased their production by lowering the sale price of their products, while lowering the their input costs like lithium but didn't care about anything else. They played a lot of games for lowering the lithium price btw.
But now the road ends here for the Chinese battery manufacturers.
CHINESE BATTERY MANUFACTURERS HAVE TO BUY AUSTRALIAN SPOD CONCENTRATE.
THEY HAVE TO BUY A LOT.
THEY HAVE TO PAY THE FAIR PRICE FOR IT.
(20min delay)