Carles Navarro Vigo  0:00  

Good morning, everyone. And thanks to PUZZLE X for the kind invitation. Today I'm going to talk about a special kind of frontier materials that we produce at BASF, which are called cathode active materials. Maybe the first thing to know is that batteries for electric cars are made up of four basic components, the anode, the cathode, the electrolyte, and a physical separator. And BSF is only active in the so-called cathode active materials. But these are the magic chemistry in the cells of the batteries. They are very complex mixtures of different metals like cobalt, nickel, manganese and aluminum, which are forming a crystalline structure to which afterward lithium is added. And each metal actually contributes to different features. So, nickel is added for capacity, cobalt and manganese for safety, and aluminum increases power. So, what you see here on the screen is a picture of our battery production material in Harjavalta, Finland, but more on that later. So, even if the predictions on the development of electric cars have failed miserably so far, I'd like to share with you our own prediction at BSF.

‍

Carles Navarro Vigo  1:23  

According to our estimates, in the year 2030, up to 30% of all the passenger vehicles produced in the world will be either battery electric vehicles or plug-in hybrid electric vehicles, with more than 70% of those vehicles produced in Asia and in Europe. So, electromobility is a huge opportunity for the environment, of course, but also for the fight of climate change, but also very specially for chemical companies like BASF. And why is that? So as you can see, the introduction of electricity into the cars can make the content of chemistry multiplied by 2.5X compared to internal combustion engines. And also we will supply more chemistry to technologies like powertrains, we will also sell more chemistry for coolants, for plastics, and more or less the same amount of coatings. But here, the key is the batteries with a cathode active material being the key component. BASF is no stranger to the automotive industry, we're actually selling more than 20% of our annual turnover to the automotive industry and this amounts last year to 12.5 billion euros. So, we sell directly to the OEMs and also to the so called component manufacturers the so called Tier One, Two and Three. The market for cathode active materials will grow in an explosive way by more than 20% a year and is projected to reach more than 4 million tons in the year 2030 with a value of 100 billion euro, which is a very significant amount. 

‍

Carles Navarro Vigo  3:13

We had more than 45,000 tons of production capacity right now, which will increase 260,000 next year. And more than half of this projected growth will be in Asia, with Europe being a distant second and the US in a laggard position. The composition of cathode active materials is very important, because with that, you can tailor the performance to the needs of different kinds of batteries. So, you can choose to go low on nickel, which is the main component, the main high tech component, and then you can have a moderate cost, but also like a lower range which is perfectly fine for low and entry segment cars. You can choose to go higher or nickel and then you can meet the needs of luxury cars with a higher demand for range, or you can go even higher with more than 85% of nickel in the composition and then you can also serve the needs of heavy vehicles. 

‍

Carles Navarro Vigo  4:11 

The main needs for development are the ones you see on the screen. So, you have fast charging, you have sustainability, you have low cost, safety, lifetime and of course driving range. The way that chemical manufacturers can serve the needs and meet those requirements is the real key to success and cathode active materials are really the solution for that. Very interesting to know that of the cost of an electric car, 30% Is the battery and in the battery, 80% of the cost is attributed to the cell, and of this cell then 40% are cathode active materials, and inside this mixture, 60% is due to the metals inside. So all in all 10% of the cost of an electric car is cathode active materials, and this is where the value I was mentioning before comes from. 

‍

Carles Navarro Vigo  5:09

So, then as you can see, the secret source is the metals, which amount to 60% of the cost of the cathode active materials, with the rest being like the processing fee. These are metals that are not free from challenges. Among them also the volatility in their prices. For instance, nickel is projected to triple in demand for the next five years, and then it will become much more scarce. Lithium is already scarce, but we project their demand to remain more or less stable. And for cobalt, the projection is that it will decrease in demand, because of its, let's say environmental problems. So, the way that BASF is handling this is by establishing long term partnerships with established suppliers. So, the key partners in this case are two companies, Nornickel a Finnish company and Eramet, which is a French company that operates all over the world. So this is a market where you can not succeed without lots of capital expenditure and technology, but also with very, very solid partnerships to make you succeed. 

‍

Carles Navarro Vigo 6:25

So we have an emerging setup of production infrastructures in Europe, we're investing hundreds of millions of euros in two plants. The first one was in Finland, in Harjavalta. This is the picture you have that you saw at the beginning, this is where we will produce the so-called precursors for cathode active materials. And this product will be sent to a second factory, which has been built in short, either in Schwarzheide, Germany, where the cathode materials will be finished. With the capacity right now of 24,000 tons, which is a very small capacity, just enough for 200,000 batteries, which is already fully contracted. So the thing is, this factory in Finland will run completely on renewable energies. And we'll get cobalt and nickel from our partner and Nornickel, which runs a refinery just nearby. 

‍

Carles Navarro Vigo 7:20

And then just to finish, you cannot also succeed in this market if you don't have recycling capabilities. This is extremely important for BASF for our strategy of a circular economy. So thanks to recycling, you can recover up to 90% of the metals contained in the battery, which is a very substantial challenge right now. You can also reduce the CO2 footprint by more than 25%. And we plan also to get 10% of our total nickel demands from these recycling activities. Also want to run these processes with the best technologies and state of the art technologies that will allow us to be the best and most sustainable producer in the battery cathode action materials sector. So just to recap, the automotive industry is in a huge seismic change moment. Electromobility is the key for this change. The cathode active materials are key to electromobility. And to run a successful business in this area, you really need the capacities for production. Also the technology, the stable and reliable supply of metals, and also the partnerships, which we already have. Right now we employ 1900 employees in this business unit worldwide. There are 300 scientists. We have extensive IP coming from our 15 years of development in our battery researcher centers in the US in Japan and in Europe. And we will attain sales of 7 billion euro in 2030, with a capacity by then of 400,000 tons of production of these kinds of materials. And we're ready to invest between three and a half and 4 billion euro to make it possible, while becoming, as I said just a moment ago, the best in class and more sustainable producer of active materials in the world. Thank you very much!

‍