Epsilon seeks US-Japan-style deal amidst low-key minerals auction

The tepid response to the recent mineral block auctions has thrown a wrench in India’s EV ambitions. Epsilon believes the answer is a push for an agreement on critical minerals with the United States.

By Shahkar Abidi calendar 29 Apr 2024 Views icon2749 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Epsilon seeks US-Japan-style deal amidst low-key minerals auction

The recent auction for critical minerals in India wasn’t the barn burner the government had been hoping for. Of the 20 blocks on the anvil, as many as 13 failed to attract ample bids, leaving industry insiders scratching their heads. Industry experts believe that the puzzling hold-up of Indian mining auctions is a result of uncertainty over the “actual availability” of minerals and a lack of “off-take visibility” that has investors hesitant to move forward without guaranteed buyers for the materials they mine. Also, with India’s EV dream hinging on a robust domestic battery material supply chain, the government has yet to come up with an impetus like the Production-Linked Incentives Scheme for component manufacturers, even while they remain available for advanced chemistry cells. 

Vikram Handa, Managing Director of Epsilon Advanced Materials, a major player in battery materials, says this is a wake-up call for India. The need of the hour, he believes, is an aggressive push for an agreement on critical minerals with the United States, similar to the one Japan scored along with the Inflation Reduction Act (IRA). The deal allows battery materials sourced from Japan to qualify US customers for IRA subsidies. Also, while it certainly benefits the US, the deal also allows companies from Japan and other partner nations access to the large US market later.

This critical mineral agreement with Japan stands out because the country has a robust battery cell manufacturing industry with companies like Panasonic, but it does not have significant domestic production of battery raw materials like anode and cathode, among others. Just like Japan, India — considered the world’s third largest automotive market — currently does not have established critical mineral sources.

However, with tremendous technology adoption, investments and the right government policies, India can develop a processing industry to manufacture cells for EVs. In this context, Handa added that in addition to the need for a deal on critical minerals, he and his team were also sensitising governments on why component manufacturers require incentives, to establish a well-developed ecosystem for EV battery manufacturing.

The IRA: A potential game-changer for EVs

The IRA provides tax credit grants of USD 35 per kilowatt-hour (kWh) for domestically produced battery cells, USD10/kWh for domestically produced battery modules and a 10% production cost credit for mining critical minerals and producing electrode active materials, including cathode and anode active materials.

Introduced in August 2022 by the US Congress, the IRA is considered one of the most significant climate legislation aimed at lowering domestic inflation — notably brought on by the global energy crisis amid measures to tackle climate change. A key stated goal of the act is to reduce carbon emissions by around 40% by 2030. The agreement includes a combination of grants, loans, tax provisions and other incentives to boost the adoption of clean energy, vehicles, buildings and manufacturing. In total, roughly USD 370 billion is expected to be disbursed under the act.

While the scheme remains robust on several parameters for the US, it does not shy away from bringing to light the country’s rivalry with China, which is now among the largest EV players in the world and also a threat to the US global hegemony. As a consequence, the scheme defines China as a “foreign entity,” which means customers would not qualify for IRA subsidies if they sourced battery materials from China. As a tit-for-tat reaction — a norm in geopolitics and diplomacy — China announced restrictions on the export of certain high-grade graphites. This was a significant decision, considering that it’s among the largest graphite manufacturers and refines more than 90% of global graphite into materials used in almost all EV battery anodes.

Amid geopolitical tensions with China, the US appears to be securing critical materials from friendlier countries. Besides the critical mineral agreement with Japan, they are in similar talks with the European Union and the UK. In a nutshell, these agreements seemingly cover free trade in critical minerals among the countries.  “If India can secure a similar agreement, it could attract significant investment into its domestic battery material production, with tremendous demand and off-take visibility from the US market. This would bolster the local EV supply chain, a crucial factor for sustained growth in the industry,” Handa told Autocar Professional, adding that as ecosystems develop, battery materials will also get increasingly used in the Indian EV market.

Epsilon leads the charge

While their discussions with the government may take some time to come to fruition, it hasn’t stopped Epsilon from taking strong measures for its benefit. The Indian company has already invested heavily and is planning a further USD 2.5 billion war chest to build mega-factories across the globe, including a large-scale facility in India.

Their recent acquisition of a centre for lithium-ion phosphate (LFP) cathode active material technology in Moosburg, Germany, marked their entry as a global company capable of providing manufacturers with both cathode and anode materials for lithium-ion batteries. With this purchase, Epsilon is now the first country in Asia, outside of China, to manufacture LFP cathode materials.

The Moosburg facility will greatly reduce Epsilon’s technology development and scale-up timeframe. The centre is equipped to produce LFP and lithium manganese iron phosphate (LMFP) cathode in small, laboratory-scale batches to up pilot-scale material. It features a versatile pilot customer qualification plant, designed to validate new materials, and utilises a hydrothermal process, a cleaner metal processing solution that results in a more eco-friendly battery-metals supply chain.

Cathode materials are critical components required in the production of lithium-ion cells that constitute 50% to 55% of the cell cost. Currently, some 70% of cathode materials and 100% of LFP cathodes for lithium-ion batteries are produced in China.

“The advanced technology centre in Moosburg strategically positions us to lead the industry in cathode material manufacturing,” Handa said, asserting that this could be a major step towards breaking China’s dominance in the battery material space.

Sunit Kapur, CEO at Epsilon Advanced Materials added: “Integrating the cathode expertise from the Moosburg technology centre with our anode business uniquely positions us to deliver comprehensive solutions to customers, delivering anode and cathode to empower them to optimise the performance of their batteries.”

Epsilon Advanced Materials previously announced an investment of Rs 9,000 crore to establish an anode battery materials manufacturing facility in Bellary, Karnataka.

The Mumbai-based company hopes to break ground on this plant in 2024 to build a large-scale customer qualification unit by 2025, which will scale up to 1,00,000 tons by 2030. Epsilon also plans to build a manufacturing facility worth USD 650 million for graphite anode materials in Brunswick County, North Carolina, USA, and is investing Euro 600 million to develop a graphite processing facility in Vaasa, Finland.

With the elections underway in India, any further government-level talks with the US on a critical mineral agreement will be pushed by at least a few months, to proceed after a new administration takes charge. 

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