The US is reportedly preparing to revise the Foreign Entities of Concern list (FEOC) under the Inflation Reduction Act (IRA) in 2025.
The negative electrode materials industry is reportedly set to be affected, and some producers of electric vehicle batteries will no longer qualify for tax incentives.
It is widely speculated that Chinese entities in the negative electrode materials industry will be listed as FEOCs. This will diminish China's competitiveness in the market for negative electrode materials.
Graphite is the primary component of negative electrode materials. As battery manufacturers seek alternatives to Chinese graphite, the global competition landscape for negative electrode materials is set for a sea change.
South Korean media outlet the Elec reported findings from SNE Research saying that companies from China, Japan, and South Korea primarily dominate the market for negative electrode materials for lithium-ion batteries.
Key players include China's BTR, Jiangxi Zichen, and Shanshan Corporation; Japan's Hitachi Chemical, Mitsubishi Chemical, and South Korea's lithium-ion leviathan, Posco Future M.
Production volume is split between China with 84%, Japan with 10%, and South Korea with a 6% share. Chinese companies enjoy a significant lead.
If negative electrode materials companies are set for the FEOC chopping block in 2025, the global market may become a two-horse race between Japanese and South Korean companies.
Posco Future M is the only company in South Korea producing negative electrode materials. The company manufactures negative electrode materials using natural graphite in Sejong City and artificial graphite in Pohang.
Since all of Posco's natural graphite is imported from China, the company is likely to be affected by a revised FEOC list. The company is reportedly evaluating the possibility of importing natural graphite from Madagascar and Tanzania.
For artificial graphite, Posco Future M has an annual production capacity of 8,000 metric tons. The company intends to increase this to 18,000 metric tons in 2024 and 36,000 metric tons in 2025.
Hitachi Chemical plans to establish a factory in the US to meet the demand there. It estimates that the annual production capacity there will reach 10,000 metric tons.
Hitachi Chemical is also seeking graphite suppliers outside of China and is evaluating the possibility of sourcing from Australian companies. In 2023, the company's annual production capacity for negative electrode materials was 12,000 metric tons.
American electric vehicle manufacturers such as General Motors, Ford, and Stellantis procure batteries from South Korean battery manufacturers. Given the status quo of US battery supply chains, S Korea's battery manufacturers may be in a more advantageous position compared to Japanese counterparts in response to the potential impact of FEOCs.
Panasonic is the only Japanese battery manufacturer that supplies batteries to Tesla.
Silicon-based negative electrode materials could be an alternative to graphite negative electrode materials. They offer a tenfold higher energy density but face issues such as expansion and contraction, requiring the addition of 4-5% graphite negative electrode materials.
If silicon-based negative electrode materials cannot overcome their inherent drawbacks, graphite may still be necessary for negative electrode materials in the future.
