April 30, 2020: Coronavirus is likely to exacerbate the deglobalization of the lithium battery supply chain, IHS Markit research manager for energy storage Julian Jansen told ESJ on April 29.
Even before the pandemic, the lithium battery chain was beginning to experience an element of deglobalization, he said — with one key trend being observed in China, where over the past two years, lithium battery manufacturing capacity has been falling as a share of the global total.
“New capacity announcements in mainland China have declined year on year for the last three quarters, while capacity expansions are being accelerated, especially in Europe,” he said, although more than half of the new European facilities were owned and operated by Asian firms.
“Nevertheless, even before the current health crisis, the Li-ion battery value chain was starting to experience deglobalization. Governments sought to increase local production and reduce dependencies on Chinese manufacturing, while companies sought to reduce logistics expenses by building facilities closer to their customers.
“While Covid-19 may slow down the development of new manufacturing plants, we still expect significant expansion and potentially even more focus to shift supply chains closer to their respective end markets to mitigate the risks exposed by the pandemic.”
Another concern to manufacturers is lack of demand, which could see the industry flipping from a sellers’ market to a buyers’ one, said Jansen.
“Slowing demand will more severely affect battery manufacturers than any halt in production,” he said. “The impact on battery suppliers’ business will likely become more severe in the second quarter of 2020 as there will be a lack of new orders.”
Read Jansen’s full analysis in the next issue of Energy Storage Journal, coming soon.