May 26, 2022
Original article published in Financial Post
Canadian governments have been on a spending spree to build a new industry around electric-vehicle batteries from the ground up. LG and Stellantis are together committing $5 billion to a battery plant in Windsor, Ont., while Bécancour, Que., is becoming an automotive hub in its own right, attracting a joint General Motors-POSCO venture and other multinationals as well as industry upstarts like StromVolt. Meanwhile, the country’s critical minerals strategy got up to $3.8 billion in the most recent federal budget.
Yet as the supply chain builds out, it’s becoming clearer that there are still holes. Canada uses 70 per cent of its domestic nickel for stainless steel instead of battery-grade nickel sulphate, and two-thirds of lithium mined in the West is shipped to China for processing amid a shortage of Canadian facilities that can process lithium bulk samples.
To provide a look at how the nascent EV battery supply chain industry is developing in Canada, The Logic compiled battery announcements and reports from its archives and interviews over the past year, talked to experts and reviewed the operations of dozens of companies listed on the Toronto Stock Exchange and TSX Venture Exchange to find examples of critical mineral miners.
While this methodology doesn’t capture every possible supplier in the country, it gives a glimpse into where Canada most urgently needs to attract investments and talent to build a sustainable industry.
Canada has been pitching its mines-to-mobility strategy and landing deals to build big battery-material plants, from LG to GM. That has opened opportunities for plant suppliers—but is building a complete EV battery in Canada possible? Industry experts say there are still crucial holes that leave them reliant on shipping or importing from China, which dominates the market.
“Strategically, I think the government is actually doing a good job here by bringing in these kinds of anchor investors like GM and POSCO, BASF, Stellantis and LG,” Dan Blondal, CEO of Nano One Materials, told The Logic. “They’ll drive further investment.”
Blondal said that the midstream industry—upgrading raw materials for battery use—could be a key, but often overlooked, area for the country to develop.
“In Europe, they’ve launched this whole battery thing, but they’re stuck with adopting a midstream that has got all these inefficiencies. We in Canada have a tremendous opportunity here to set ourselves apart from everywhere else in the world by cleaning that up,” he said.
Here’s a look at key parts of the EV battery supply chain and how Canada stacks up so far:
Battery cells, modules and packs
What it is: Battery cells or pouches go into modules, which are combined to make up battery packs.
Examples of Canadian suppliers: Stellantis-LG is building a $5-billion plant for 2024 production (Ontario, headquartered abroad; cells and modules); StromVolt is spending $200 million to $300 million with plans for initial capacity of 250 megawatt hours, expanding to 10 gigawatt hours by 2030 (Quebec, cell factory in progress using equipment from Taiwan’s Delta Electronics); BritishVolt has made tentative inroads (Quebec, headquartered abroad; cells, cathode and anode plant); Molicel, which says it was North America’s first lithium-ion cellmaker and makes everything from cordless-vacuum to flying-taxi batteries, has an R&D and distribution centre (B.C., headquartered abroad; cells), Electrovaya (Ontario; cells, packs, electrodes, separators); Lion Electric is investing about $185 million for a plant to begin operations in early 2023 (Quebec, packs and modules)
Potential gaps, competition or hurdles: As of the first half of 2021, more than 90 per cent of global EV battery capacity came from seven companies, all in Asia: CATL, LG Energy Solution, Panasonic, Samsung SDI, BYD, SK Innovation and CALB, according to Toronto-based research firm Adamas Intelligence. North American suppliers will have to compete with a well-oiled machine.
“There’s virtually no [lithium iron phosphate] battery production, other than a very small footprint in Quebec, and in North America there’s very little cathode production,” said Blondal.
“There’s a lot of mushiness in the supply chain, particularly in North America, that needs to be resolved. Many components are having to be brought in from overseas, and for us personally, we’re trying to develop it all with a North American, or at least North American-friendly, context.”
Canada will also have to prove its value in the region, with major companies like China’s CATL still shopping for facility locations across the U.S. and Mexico. In a House of Commons committee hearing earlier this year, battery scientist Jeff Dahn told lawmakers that Canada has two small businesses—Electrovaya and Molicel—with a track record of making batteries for manufacturers like Toyota and access to precision machines like electrode coaters and electrolyte filling machines. But Electrovaya’s Strategic Innovation Fund application was rejected by the government in the past year, while Molicel’s took years to be accepted.
“It takes far too long,” Dahn said. “These companies should be encouraged, not discouraged, and in fact even pushed by the federal government to expand in Canada.”
What it is: Protects critical battery components from weather and crashes, and houses electrical components and sensors.
Example of Canadian suppliers: Magna (Ontario) is building a 170,000-square-foot facility and hiring 150 people to build battery enclosures in Chatham, Ont., for the Ford F-150 Lightning.
Potential gaps, competition or hurdles: On a February earnings call, Magna CEO Swamy Kotagiri said the company’s enclosures business is a bet that it expects to keep driving growth for years to come. To that end, the company is plowing in cash, even amid rising labour and commodity costs. It also just broke ground on a New Mexico plant that will make inverters, motors and on-board chargers with LG for GM’s EVs.
One analyst asked whether EV makers are planning to outsource more parts, a sweet spot for Magna.
“As we sit here today and look at the cadence of the sourcing activity, we don’t see a significant shift as of yet, but that is to be seen,” said Kotagiri. “If you look at what we have in terms of footprint and capabilities, we should be well positioned to address that piece.”
What it is: Elon Musk describes it as the “machine that builds the machine.”
Examples of Canadian suppliers: Tesla, which has two manufacturing facilities and three research and development centres in Canada, is building another facility in Markham, Ont., to manufacture battery-making equipment. Novonix (Nova Scotia) offers cell-testing services and equipment used by Panasonic, CATL, LG Chemical, SK Innovation and Samsung SDI.
The National Research Council of Canada also has equipment hubs, including a pilot-scale battery manufacturing line for prototypes in Boucherville, Que., that has special machines, a battery testing lab in Ottawa used by both regulators and manufacturers, and an R&D group that gives members access to “unique technologies.”
Potential gaps, competition or hurdles: Canada does not make the machinery needed for some types of mineral processing and must import it from countries like China and Japan, according to testimony for the House of Commons Standing Committee on Natural Resources summarized in a report last year. This “intermediate” step for materials like graphite or aluminum is a “weak link” in the critical minerals supply chain, experts said.
Cathode active materials
What it is: The most common types of EV batteries today push lithium ions back and forth from an anode layer to a cathode layer, passing through another layer of electrolyte. Cathodes are the electrodes that have the biggest impact on range, and automakers say they’re also the most costly part of batteries, typically containing critical minerals like nickel, manganese, cobalt or iron phosphate.
Canada is one of two countries with all of the minerals and metals needed for cathode production, and unlike Australia, it has an auto manufacturing footprint. But metals and minerals from mines must be converted into an electrochemically active material through two steps: precursor production and cathode active material (CAM) production. This process is often done in Asia, but Canada has seen a few key investments in CAM plants over the past year, some from companies headquartered overseas like BASF.
Examples of Canadian suppliers: GM-POSCO (Quebec, headquartered abroad), BASF (Quebec, headquartered abroad), Novonix (Nova Scotia), Nano One Materials (B.C.; Quebec)
Potential gaps, competition or hurdles: The CAM plants filled a big gap in the supply chain, but Canada could still beef up on precursor materials, said Kunal Phalpher, chief strategy officer of Canadian battery and scrap recycling company Li-Cycle.
“PCAM or precursor is the step between the raw material, like nickel and cobalt … and cathode active material. There’s an intermediate process,” said Phalpher. “That’s a North America-wide gap … that Canada could help fill.”
What it is: The part of the battery that improves the ability to hold a charge and charge quickly, using materials like silicon and graphite.
Novonix CEO Chris Burns, whose company’s new Tennessee plant aims to be a large-scale supplier of synthetic graphite anode material, has previously warned that “essentially zero battery-grade anode material is currently produced stateside.”
Examples of Canadian suppliers: Novonix (Nova Scotia); Li-Metal (Ontario); VoltaXplore (Martinrea-NanoXplore; Ontario and Quebec, respectively).
Potential gaps, competition or hurdles: About 70 per cent of graphite used in battery anodes today comes from China, leaving a hole in the raw materials chain. Maciej Jastrzebski, CEO and co-founder of Canadian lithium-metal anode company Li-Metal, noted that even though Canada has rich supply chains for metals like copper, suppliers here don’t necessarily process battery-grade materials like copper foil.
“We don’t produce these battery-type foils in the same quantities or qualities that would be useful for something like our processing. It’s some of these other less headline-grabbing parts of the supply chain that would be really nice to integrate in one place,” said Jastrzebski.
What it is: Different battery chemistries require different materials to generate power, and they are typically identified by the combinations of metals they use, such as NMC (nickel manganese cobalt), NCA (nickel cobalt aluminum), LFP (lithium iron phosphate) and LMO (lithium-ion-manganese oxide).
While some metals, like cobalt, are more problematic to source, NMC and NCA batteries are considered to have superior performance, while LFP and LMO batteries are cheaper, according to Lithion.
Many companies are working on improving metal and mineral options for batteries. Electra Battery Materials is planning to open North America’s first cobalt processing plant in Ontario, while Tesla has determined LFP batteries are good enough for its luxury vehicles and easier to recycle.
Examples of Canadian suppliers: Several major multinational miners already have producing mines in the country for common battery inputs like copper and nickel, including Glencore and Vale. A review of dozens of TSX- and TSXV-listed companies reveals many that are both listed in Canada and mining or exploring in Canada, including but not limited to:
- Copper: Agnico Eagle, American Manganese, Azimut Exploration, Brixton Metals, C3 Metals, Callinex, Centerra Gold, Copper Fox, Cornish Metals, Dore Copper, Doubleview Gold, Eloro Resources, Enduro Metals, Eskay, Franco-Nevada, Falco Resources, Foran, Galway Metals, Hudbay Minerals, New Gold, Prospector Metals, Seabridge Gold, Teck, Wheaton Precious Metals and others.
- Nickel: Many of the above companies, like Azimut Exploration, Cornish Metals, Eskay, Franco-Nevada, Prospector Metals, Wheaton Precious Metals; plus firms like Canada Nickel, FPX Nickel and Giga Metals.
- Cobalt: Brixton Metals, Canada Nickel, Canada Silver Cobalt Works, Cornish Metals, Giga Metals, Wheaton Precious Metals and others.
- Manganese: The Woodstock area of New Brunswick has attracted companies like Manganese X Energy and Canadian Manganese. Some Toronto-listed miners are looking at deposits abroad, like Giyani Metals, American Manganese, Aftermath Silver and Euro Manganese.
- Lithium: Includes Avalon Advanced Materials, Critical Elements Lithium, E3 Metals, Frontier Lithium and others—plus Nemaska Lithium, which delisted from the TSX.
- Graphite: Includes Focus Graphite, Mason Graphite, Nouveau Monde.
- Iron: Canada is the eight-largest producer of iron ore in the world with mines in Quebec, Nunavut, and Newfoundland and Labrador, and companies like Labrador Iron Ore.
- Silver: Includes American Creek Resources, Artemis Gold, Benchmark Metals, Brixton Metals, C3 Metals, Callinex Mines, Canada Silver Cobalt Works, Copper Fox Metals, Dolly Varden Silver, Doubleview Gold, Eloro Resources, Enduro Metals, Eskay Mining, Falco Resources, Fireweed Zinc, Foran Mining, First Majestic Silver, Franco-Nevada, Gold Terra Resource.
Potential gaps, competition or hurdles: Though the Mining Association of Canada lists 29 non-ferrous smelters and refineries in Canada, nearly every expert interviewed by The Logic for this article mentioned refining capability as an area to beef up.
Other potential hurdles include low exploration activity for battery metals. Copper, silver and nickel can be used in many industries and some are commonly mined by companies searching for popular metals like gold. But many battery-specific metals like lithium fall into a category that represented less than three per cent of exploration spending in the industry last year. Even if activity increases, getting a mine from exploration to production takes nearly 17 years on average, according to the International Energy Agency.
China, on the other hand, has those resources ready in spades. In 2019, it was among the top three nations that dominated the market for copper, lithium, nickel, cobalt and rare-earth elements by processing volume.
There’s a reason countries like Canada have veered away from commodities like rare-earth metals, which are commonly mined in a way that can be toxic to the surrounding environment. In that case, competing with China may come at a high cost.
“There really doesn’t exist enough raw materials to be able to make all these batteries, for a start. And most of the metals needed are primarily from one source, which is China,” said Lewis Black, CEO of tungsten miner Almonty Industries.
“China has developed their supply chain very well for 30 years. This wasn’t something they just dreamt up. They really have had a very significant plan, and they executed extremely well,” he said. “It’s going to take a while to catch up.”
What it is: Battery recycling is not only a way to keep the 245 million EV batteries on the road by 2030 out of landfills—it will also likely supplement critical mineral supplies by extracting them for reuse in new batteries until supply catches up with demand. Some companies also recycle excess scrap directly from battery production lines, limiting waste in the battery-making process.
Examples of Canadian suppliers: Li-Cycle (Ontario), Lithion (Quebec), Moment Energy (B.C.), Retriev Technologies (headquartered abroad but has a facility in B.C.) and Stelco (Ontario).
Potential gaps, competition or hurdles: Phalpher said Li-Cycle has been fortunate to break into the U.S. market while maintaining its Canadian operations, noting that a 10-times bigger population means access to 10 times as many batteries to recycle. The company recently announced it will be the preferred recycling partner of LG Energy Solution in North America.
There, it will be up against U.S. companies like Redwood Materials, founded by Tesla co-founder JB Straubel. Mining companies are also eyeing the space elsewhere, with Glencore moving into the recycling industry in the U.K.