More twists and turns...China's dominance at the heart of...

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srood

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29/03/23

17:05

Post #: 67026968
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Originally posted by WhatsTheTip: ↑

The big wild-card is the IRA interpretations. Unless American consumer preferences change, the NCM batteries are key to the American market. I've seen a couple of references that the IRA regulations are due by the end of March 2023.

The country of concern conditions are a key wild-card for E25. Its a certainty that the US treasury will have received submissions looking to soften the US country of concern condition. Will the US soften to something like at least 80% of the battery must avoid country of concern materials. Will the US come down with a hard line in the regulations to be issued by the end of the quarter and say having any or almost any material processed in countries of concern (China) would make the battery ineligible for the retail price credits? This hard-line position would mean every NCM battery would be ineligible unless new supply lines are created and built quickly. My understanding is 100% of HPMSM comes from China. Every battery OEM/Battery maker wanting to make a product that is eligible for the retail credits would need an alternative source of Manganese supply for their NCM batteries. Only a company in the advanced stages of feasibility would have a chance of being in production by 2025. The few hundred million HPMSM capital cost would be largely irrelevant because if a company had even potentially even 1m of EV sales, the $7,500/EV credit* (*it could be half the credit. Need to double check), would be $7.5b of value to the consumer and if lost, $7.5b of pricing pressure from competitors with eligible product.

A hard-line interpretation would also put pressure on the limited Lithium Hydroxide supply from non-Chinese sources needed for NCM. This country of concern issue will be less problematic for LFP batteries because they use Lithium Carbonate which can be sourced from South American Brine and avoid Cobalt/Nickel. Both LFP and NCM battery types would need to address the limited Non-Chinese supply of spherical Graphite. The multiple logistical issues may have the US soften their position.

The second problem is the progressively increasing battery content rules that reach 80% in a few years. I presume that a NCM battery with Congo cobalt and Indonesian Nickel will fail this 80% test. The price of Cobalt alone may mean most NCM batteries struggle unless Australian/alternative acceptable sources come online. If you need to allocate your 20% to Nickel, Graphite and Cobalt you don't have a chance, so you need to source from new locations. One of the easiest alternative options is to go LMFP because you avoid Cobalt and Nickel (for price and supply chain reasons). You do however need an acceptable source of Iron Phosphate, Lithium carbonate and HPMSM. The combination of pricing, logistics and retaining access to American EV consumer credits may well result in significant LMFP uptake.

My guess is that E25 has pending contracts if the IRA interpretations take a hard line around their country of concern provisions.

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More twists and turns...China's dominance at the heart of it.
Hopefully we get some news soon. Timing couldn't be better.

E25 Price at posting: 63.0¢ Sentiment: Buy Disclosure: Held
4 Upvote

0 Great analysis

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