Umicore raises $1.1 billion to invest in cathode business

Umicore, the Belgian precious metals and catalysts giant, has raised $1.1 billion from investors in exchange for shares in the company to fund its growth plans, particularly those involving cathode materials for lithium-ion electric car batteries.

That the firm managed to raise the cash within two-and-a-half hours of placing its offer despite challenging conditions in financial markets is a clear vote of confidence in its strategy, says CEO Marc Grynberg. The investment plan follows BASF’s decision last year to put $475 million into developing its cathode materials business.

Umicore is already a major supplier of nickel-manganese-cobalt cathodes for lithium-ion batteries. It will spend most of the $1.1 billion on new facilities in China and Europe to help meet anticipated growth in demand for electric vehicle batteries. According to the International Energy Agency, electric car sales are set to grow from about 2 million in 2016 to 71 million in 2025.

A key challenge for Umicore, as well as rival battery material producers such as BASF, is managing the rising cost of lithium and cobalt. Cobalt prices have tripled in the past couple of years to a price in recent days of about $81,000 per metric ton.

Umicore’s says it has a supply agreement with a producer in the Democratic Republic of the Congo. BASF and British cathode materials producer Johnson Matthey say they also have supply deals in place. European car maker BMW is reportedly seeking contracts to ensure cobalt and lithium supplies for up to 10 years.

Umicore also plans to increase its capacity for recycling cobalt, lithium, and other metals. The company currently operates a 7,000-metric-ton-per-year battery recycling plant in Antwerp, Belgium.

While cathode architecture is shifting toward higher nickel loading, it is not possible to design cobalt-free lithium-ion batteries, Grynberg says.

“Cobalt is the element that makes up for the lack of stability of nickel. There isn’t a better element than nickel to increase energy density, and there isn’t a better element than cobalt to make the stuff stable,” Grynberg says. “So you hear about designing out cobalt. This is not going to happen in the next three decades. It simply doesn’t work.”

Still, rising prices could open the door to developers of alternative technologies. U.K. start-up Faradion, for one, has developed sodium-ion batteries that avoid the use of cobalt or lithium. The firm claims the batteries’ cathodes can be made at half of the cost of today’s lithium-ion battery cathodes.

“Faradion’s sodium-ion technology replaces lithium with sodium and relies solely on nickel as the redox active transition metal in its positive electrode active material,” says Jerry Barker, Faradion’s chief technology officer. According to Barker, a “cobalt cliff is looming.”