China Leads Global Trade in Lithium-Ion Batteries

The age of the lithium-ion battery has arrived, and it’s Asia, especially China, that is dominating burgeoning global trade.

In the first 10 months of 2020, China exported $12.5 billion of lithium-ion batteries, followed by South Korea ($4 billion), Poland ($3.2 billion), and Germany ($2.7 billion), according to Trade Data Monitor. As a recent story in the Wall Street Journal points out, that’s more control over the market that anything in the crude oil industry, where even the world’s top producers – the U.S., Saudi Arabia and Russia – all generate less than 20% of global production.

Only invented in the second half of the 20th century and later pioneered for mass production in laptops and camcorders, lithium-ion batteries are the linchpin of a booming new trade in electric vehicles.

Governments around the world, concerned about climate change caused by carbon emissions, are pushing massive private investment in electric-powered cars. The new administration of President Joe Biden has promised policies that encourage Americans to buy electric vehicles. Beijing has ordered that 40% of cars in China be electric by 2030. General Motors, the giant U.S. automaker, has pledged to invent dozens of new electric vehicles, and only make EVs by 2035. It wants to catch up to companies like Tesla, the U.S.-based global leader, and Germany’s Volkswagen. Although EVs make up less than 5% of all cars on the road, it’s clear that Tesla Model S, Chevy Volt, and Toyota Prius Prime are the future of the industry.

The biggest import market for electric vehicles is Europe, where use is encouraged by high gasoline taxes and incentives. The world’s top electric car importers are the Netherlands ($3.6 billion), Germany ($3.1 billion), Belgium ($2.8 billion), the UK ($2.3 billion), and Norway ($2.3 billion). (That’s why the latter, the smallest on the list by population, was the subject of General Motors’ Super Bowl ad starring Will Ferrell.) However, the biggest overall market, including imports and domestic production, is China, where Volkswagen, BMW, Toyota, Honda and other world-class carmakers have all built plants to make electric vehicles.

China has been ramping up its battery capacity, thanks in large part to Contemporary Amperex Technology Ltd, or CATL. Rivals include Japan’s Panasonic, and South Korea’s Samsung SDI and LG Chem. Tesla manufactures batteries at a plant in the Nevada desert it operates with Panasonic.

China’s top customers for lithium-ion batteries were the U.S. ($2 billion), Hong Kong ($1.5 billion), Germany ($1.2 billion), and South Korea ($1.1 billion). And the world’s top exporters of electric cars are Germany ($6.2 billion in the first 10 months of 2020), the U.S. ($4.9 billion), Belgium, ($4.8 billion), and South Korea ($3.2 billion).

To be sure, it’s not just cars and trucks. Power plants are also using battery technology. They’re used to store excess power and then redistribute it when there are spikes in demand. The technology is elementary: Lithium ions are transferred via a liquid from cathode to anode and back to cathode. But recent innovations have brought down production costs closer to those of petroleum-powered engines. The price different between an electric engine and fossil-fuel engine is expected to decline to zero in the next five years, and by 2030, as many as one-third of cars on the roads are expected to be electric.

The strong demand has greased a supply chain of battery ingredients, including lithium, cobalt and manganese. In order for mass production of electric vehicles to be commercially viable, raw material supplies have to remain constant and affordable. Australia, Chile and China are the world’s top producers of lithium. A bigger problem is cobalt, in which the Democratic Republic of Congo, a war-torn country, dominates production and trade.