Rules of origin could threaten UK EV production

15/02/2021 09:06 Renewable

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This would have significant implications for electric vehicle (EV) production and might require the UK to start importing battery metals including cobalt and lithium, according to UK battery developer Britishvolt.

Introduced in January, the new standards mean UK carmakers need to prove that at least 40pc of the value parts in a finished car originated in the UK. With supply chains as they currently are, this could present a major challenge to the UK's automotive sector as lithium, cobalt, nickel and other battery metals form a significant proportion of the cost when making an EV.

 

"Although the implications of the free trade agreement will continue to be investigated, the rules of origin requirements highlight that for future BEV (battery electric vehicle) manufacturing in the UK and EU, battery cells will need to be made in-region too," Britishvolt's chief technical officer, Allan Paterson, told Argus.

 

He noted that battery packs account for around half the value of EVs, and cathode material is the largest individual item by price tag. Manufacturing it would be a UK first and would require the UK to source battery metals including cobalt and lithium as raw materials.

 

"UK businesses are likely to react to these potential tariffs by sourcing more UK origin materials and components — companies like Britishvolt, that are investing in the UK, are expected to be well placed to supply UK origin batteries for UK and EU built electric vehicles," UK business advisors Grant Thornton's head of automotives, Oliver Bridge, said.

 

Clearing up the supply chain

 

Efforts to make supply chains more transparent have been given new emphasis by the rule changes.

 

Carmakers anticipating difficulty with proving the origins of their materials are putting pressure on metals and mining companies, leading to a shift in focus towards environmental, social and governance (ESG) across the supply chain.

 

"Paper is the problem. The key to creating visibility in the supply chain is the broader based need for digitisation. We need to create an awareness of information in supply chains. Investors are going to want to see proof and data," ESG consultancy SAFE Responsible Supply Chain Solutions partner Costa Caldis said.

 

Much of the recent chaos seen at UK borders has been because importers and exporters have the wrong paperwork, leading to port delays. Caldis explained that EV producers will not only need to have portions of the supply chain onshore, but also improve their management of information about that supply chain.

 

Raw material bottlenecks

 

Britishvolt has committed to using British Steel as a supplier in another move towards focusing on a UK-based supply chain.

 

Using UK-sourced steel "further strengthens" climate ambitions and Britishvolt's commitment to developing capacity in the UK after signing the UK steel charter yesterday, chairman Peter Roltun said.

 

While steel may be readily available, sourcing other materials will be more challenging. Projects such as Cornish Lithium are hoping to plug the gap for one metal, but the supply chains for nickel and cobalt remain a challenge. The UK risks being left behind amidst global competition for these metals, which are both predicted to be in deficit by the middle of this decade.

 

The strength of demand is reflected in price movements since the start of 2021, exacerbated in some areas by concurrent supply concerns. Argus assessed cobalt hydroxide prices at $16.50-18.50/lb cif China on 9 February, continuing their steep rise since the beginning of the year. Domestic nickel sulphate prices were assessed at Yn33,000-34,000t ($5,110-5,266/t) ex-works China on 12 February, up by Yn3,000/t since the beginning of the year, while cif China nickel sulphate has risen by $100/t to $3,200-3,600/t.

 

Source: argusmedia.com

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