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WA’s battery power: a question of opportunity and cost

WA’s battery power: a question of opportunity and cost

It’s no secret that WA stands on the crest of a potential once-in-a-lifetime opportunity in the new energy and battery materials sector – but how do we best place ourselves to take advantage of it and how far should we go down the production chain?

Those key questions, in the face of projections that the “new energy boom” could be worth as much as $56 billion to WA,  form part of a major report launched by the Chamber of Commerce and Industry of WA in November.

WA’s Future In The Lithium Battery Chain explores the way global trends are driving local opportunities, the potential for downstream processing in the state and the hotly-debated topic of whether we could one day hope to make batteries here.

Its launch also featured a highly-engaging Q&A session with report author Russell Barnett of Australian Venture Consultants, Neometals Managing Director Chris Reed, BHP Nickel West Asset President Eddy Haegel, City of Kwinana Mayor Carol Adams and Synergy Chairman Rob Cole.

Here are some of the points of discussion:

The construction cost crunch – and what it means

“We run into the same wall that we always run into … once those processes down the value chain become more akin to a manufacturing process, as opposed to a chemical processing process, we’re not competitive. We start off with a construction price disadvantage – basically it’s a third of the cost to build anything in China as it is here. It’s about half the price in South-East Asia and somewhere between 75 and 95 per cent of the price in most of Europe, North America, Korea and Japan. Any project is carrying a penalty of capital that we need to get back.” Russell Barnett, report author

Battery power’s catch-up game

“The only reason we are having a discussion about lithium and nickel and batteries is because the price of batteries has been declining at an exponential rate. When you talk to anyone from a Panasonic, a Samsung or a Tesla, the key turning point for electric vehicles is when the price of the battery pack achieves parity with an internal combustion engine. We’re now at a point where we are only a few years from being able to do that.” – Eddy Haegel, BHP Nickel West

Why WA rocks in the world scheme

“You can get lithium out of dirty water [brines] in the Andes or out of a rock in WA, which is lithium oxide.  If you get down to basic mineral economics, it’s cheaper if it’s already digested in water … they [South Americans] have a natural advantage to produce lithium carbonate. Nothing we can do will ever change that. But what we do have is that it’s easier to make lithium hydroxide out of rock, we can respond much more quickly to demand and we have done that. All of this demand is coming at us more quickly than we had envisaged but even with those large bits of demand, the supply is there.” – Chris Reed, Neometals

The case for a Kwinana hub

“We’ve got something like 150 companies there [in Kwinana] with some world-class symbiosis between them. We’re an area that is hungry for this kind of development to come along. The way I see it we’ve been a sleeping giant for a while and we’re doing anything we can to make it roar and get in front and get those industries to come and settle in our region. Not just for the benefit it will bring for our region but for the benefit of the state’s economy.”- Carol Adams, City of Kwinana

It’s more than just electric cars

“We’re thinking about electric vehicles and doing some work to ensure we’re ready to provide the infrastructure and tariff structure but first and foremost our focus on battery solutions is in relation to the problem the treasurer has mentioned – and it’s a good problem: how do we solve the trilemma of affordable, reliable and lower-emission technology. We’re talking about batteries all the time and we’re looking at large-scale battery technology to form part of our generation portfolio – to smooth out loads.”- Rob Cole, Synergy

Getting active – and finding champions

“Our pathway is firstly to go into nickel sulphate, then cobalt sulphate and then make cathode precursors, which is a key input into making cathodes active. We [BHP] would not do that but you can see why someone would … the question is where you go from there? Do you choose to invest in a company overseas? We don’t have an Australian champion and to the point made earlier, it’s an expensive environment. But so too is Sweden where Northvolt is setting up a competitor to Tesla batteries. It is also expensive to manufacture in Japan. If we don’t have our own national champion in this space then we clearly need to inspire a Panasonic or a Samsung to want to invest here. I don’t know if that’s possible but it seems a worthy thing to explore.” – Eddy Haegel, BHP Nickel West

Plenty of jobs – and skills to fill

“If we’re downstream processing our upstream concentrates we’re at least doubling the number of jobs hanging off the mine, we increase profitability greatly and that essentially lowers cut-off grade and mines can go longer. That’s great for the state and that’s pretty much the sum total of why we’ve got to seize the opportunity. It’s exactly what the government wants – longer life mines and more jobs. The quality of the job is also going up – from mining up into the processing and white collars. But that comes with challenges. We were looking at the School of Mines for scholarships for metallurgists for when I need them when they come out [of university] in a few years and I said ‘can you get me a panel of four?’ and they said ‘three’. I said ‘we’re offering four scholarships, can’t we get that many?’ They said, ‘there’s only three people studying that course.’” – Chris Reed, Neometals

The royalty regime

“Over the decades the WA royalty regime has generally had bipartisan support and been very stable, underpinned by a number of principles. The main ones are that it is there to provide fair return to WA for the right to use non-renewable resources. The further you go downstream, theoretically the lower the ad valorem rate of royalty you pay – thereby incentivising downstream processing. The third [point] is that the State, in terms of measuring, should get 10 per cent of mine-head value – which is a point of some contention. It’s important any changes to that system don’t penalise industry and disincentivise but also that it ensures that the system remains stable and predictable, so WA remains a favoured destination for mining capital.”
Russell Barnett, report author

What role could robots play?

“One of our major, if not our major cost penalty in construction and manufacturing in Perth is labour. Labour costs in Perth, compared to all jurisdictions involved in the lithium-ion battery supply chain, are more expensive, no question. If automation is rolled out in new factories, which of course it will be – how much does that negate that penalty? It will to some degree. But that argument also assumes no one else adopts automation. If you look at the robot intensity of Australian manufacturing it’s about the global average. It’s about 75 industrial robots per 10,000 manufacturing employees. China’s rate is slightly below that, it’s about 72/73. But the major western manufacturing centres like the US, Germany and Korea, it’s way up there – about three times that. At the moment we’re at automation parity with China – [but] there is enormous investment globally in automation and guess where that’s going? It’s going to China. Whilst we can look at automation to address that [labour cost] penalty, unless we invest very heavily we’re going to fall further behind.” – Russell Barnett, report author

Getting smarter and working smarter

“We are at the very baby steps of this journey. The number of electric cars driving around Perth, you could count on your hand how many you see in a week. But there will come a time when every second car will be an electric vehicle and that will have a flow-on effect into the materials used to make them.  We need to put some intellectual horsepower into making ourselves smarter. There is ample opportunity for visionaries in this state to think through what the consequences will be and the business opportunities that can emerge … and to partner with the CRC we hope to create, research institutions and universities, to leverage that and make something special here in WA.” – Eddy Haegel, BHP Nickel West

Watch the full panel session here: