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Oil tycoon Koch amasses $500m battery portfolio as lithium prices keep rising

As investors, it is always good to know where the big money is flowing.

Koch Industries — led by billionaire (many times over) Charles Koch — was America’s largest private company in 2020, with revenues for the 2019 calendar of ~$US115 billion, according to Forbes.

As of August 2021, Charles Koch was ranked as the 20th richest person in the world on Bloomberg Billionaires Index, with an estimated net worth of $US61.1 billion.

Built on oil, Koch Industries also has its fingers in everything from ranching, minerals, finance, and commodities trading through to tech, consumer goods… and now batteries.

The Wichita-based company has recently built up stakes worth ~US$500m in the battery ecosystem covering several different battery technologies, raw materials, chemicals, and recycling, according to Benchmark Mineral Intelligence.

These include battery recycler Li-Cycle, solid-state start-up Solid Power, a joint venture with Norwegian battery company Freyr to potentially build a Gigafactory in the US, and now a $100m stake in NYSE and TSX listed lithium project developer Standard Lithium.

Lithium prices keep rising, carbonate gets price premium

Supply of battery-grade lithium carbonate in the seaborne East Asian market was further squeezed this week, applying further upward pressure to prices, Fastmarkets says.

“One of our suppliers has no spare capacity for lithium carbonate. They will focus primarily on honoring long-term commitments and will not allocate any extra [units for the spot market],” a consumer source active in both the European and East Asian markets said.

This increased demand for battery-grade lithium carbonate in China, at a time when supply is already tight, caused the price rally in China to accelerate, market sources said.

Fastmarkets sources say prices for carbonate are trading at a premium to hydroxide because the lithium-iron-phosphate battery market – which uses carbonate – is going mental.

In July, the sale of lithium iron (LFP) phosphate batteries for electric vehicles in China surpassed the incumbent NCM/NCA chemistries for the first time since the start of 2019.

In batteries with LFP chemistry, phosphate serves as the cathode material.

NCM (lithium nickel cobalt manganese) batteries use a combination of nickel, manganese, and cobalt for the cathode, while NCMA (nickel, cobalt, manganese, aluminium) chemistry features a 90% nickel cathode.

Because iron and phosphate are more common than cobalt and nickel, LFP batteries are ~$US18 cheaper than NCM/NCA per kWh to manufacture, according to SNE Research.

The downside is that they have lower energy densities which makes them unsuitable for longer driving ranges. That is not really an issue for the stock standard work commute though, which explains their popularity.

“Due to the optimism of lithium-iron-phosphate batteries in China, the market sees more room for lithium battery-grade carbonate price to rise.

Therefore, some traders are holding their units in tight hands,” a trader in China told Fastmarkets.

“Lithium carbonate is still squeezed and as long as cathode materials producers need to operate, they have no choice but to restock with expensive units,” a second producer source in China said.

“The future of NCM [nickel-cobalt-manganese] batteries looks less promising than that of LFP [lithium-iron-phosphate] batteries, so demand for lithium hydroxide is weaker than that of lithium carbonate, which keeps the price [of battery-grade lithium hydroxide] stable.