Clean Mobility Drives Metals Demand - Matthias Dohrn, Senior Vice President, BASF Precious & Base Metal Services Bank of America, Virtual ...
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Clean Mobility Drives Metals Demand
Matthias Dohrn, Senior Vice President,
BASF Precious & Base Metal Services
Bank of America, Virtual Conference
November 10, 2020
1 November 10, 2020 I Clean Mobility Drives Metals Demand
Agenda
BASF – We Create Chemistry
BASF Catalysts Division Drives Sustainable Solutions
Precious Metals
Base Metals (Battery)
2 November 10, 2020 I Clean Mobility Drives Metals Demand
BASF – We create chemistry
Our chemistry is used in almost all industries
We combine economic success, social responsibility
and environmental protection
Sales 2019: €59.3 billion
EBIT before special items 2019: €4.5 billion
Employees (as of December 31, 2019): 117,628
6 Verbund sites and 361 other production sites
Around 100,000 customers from various sectors
in almost every country in the world
3 November 10, 2020 I Clean Mobility Drives Metals Demand
BASF’s segments
Many of our segments and divisions supply the automotive industry
Surface
Industrial Technologies Nutrition
Solutions
Catalysts,
Coatings
& Care
Dispersions & Pigments, Care Chemicals,
Performance Chemicals Nutrition & Health
Agricultural
Materials Solutions
Performance Materials, Agricultural
Monomers Solutions
Chemicals
Petrochemicals,
Intermediates
Other
Verbund
4 November 10, 2020 I Clean Mobility Drives Metals Demand
Agenda
BASF – We Create Chemistry
BASF Catalysts Division Drives Sustainable Solutions
Precious Metals
Base Metals (Battery)
5 November 10, 2020 I Clean Mobility Drives Metals Demand
BASF Catalysts covers the whole value chain for catalysts
and battery materials production
Precious metal Sourcing Production Catalyst / battery Customer industries
& base metal sources & trading material production
Battery
Primary PGM / Base
materials / e-Mobility
sources (Mines) Trading fuel cell
Iselin, London,
Shanghai, Tokyo, Mobile Mobile
Open market Moscow emissions emissions
PGM / Base PGM / Base Process Process
Refining PMC* catalysts industry
Seneca, Rome,
USA, Europe Shanghai
Scrap
collectors
Black mass
collectors
6 November 10, 2020 I Clean Mobility Drives Metals Demand * Precious Metal Chemicals ProductionPrimary sourcing of metals requires specific guardrails
Enhanced sustainability in procurement management, including
OECD Due Diligence Guidance for Responsible Sourcing of Minerals
Dedicated task force and senior level committee
to guide and decide on due-diligence action
Comprehensive sustainability assessment tools through the chemical
industry’s Together for Sustainability (TfS) initiative, including mining-
specific audit commensurate with multi-stakeholder-based IRMA audit
Participation in various topic-specific initiatives, e.g., “Cobalt for
Development” (C4D) artisanal cobalt pilot mine in DRC, Global Battery
Alliance (GBA), Responsible Minerals Alliance (RMI), International
Platinum Group Metals Association (IPA), engagement in Atacama
Lithium projects
7 November 10, 2020 I Clean Mobility Drives Metals DemandPGMs from secondary sources are of increasing importance
to enable a circular economy with a lower CO2 footprint
Companies collect spent automotive
and chemical catalysts for recycling 1 2 BASF recycles spent automotive and
chemical catalysts to recover PGM
Full loop
6 3
Sustainable supply
Automotive and chemical companies Global footprint BASF uses the PGMs to produce
use and dispose catalysts Trusted partner precious metal chemicals
5 4
Automotive catalysts reduce vehicle tailpipe BASF uses precious metal chemicals to produce
emissions and chemical catalysts more new automotive and chemical catalysts
efficiently produce fuels and chemical products
Recycling and recovery service for precious metal products provides a circular economy for which precious metal can be
reclaimed for use in producing fresh salts and solutions for industrial applications
Recycled PGMs offer a sustainable and environmental benefit from end-of-life materials
All of the recovered metal we generate is used to supply our mobile emissions catalyst and chemical and process catalyst businesses
The auto catalyst recycling market is the second largest source of PGM supply and is expected to grow significantly in future years
8 November 10, 2020 I Clean Mobility Drives Metals DemandSustainable, low carbon mobility requires adoption of powertrains
Tightening emission regulations and technology advances to lead adoption
Conventional
Internal combustion
Hybrid
engine (ICE);
catalyst required ICE and electric motor; Battery
catalyst and battery
required Electric motor;
battery required
Fuel cell
HEV
Electric motor
and hydrogen;
catalyst required
PGM loadings increasing Expanding Future
PGMs PGMs / Base Metals Base Metals PGMs
Platinum Rhodium Platinum Lithium Lithium Cobalt Platinum Iridium
Palladium Palladium Nickel Nickel Manganese Ruthenium
Rhodium Cobalt
Manganese
9 November 10, 2020 I Clean Mobility Drives Metals DemandAgenda
BASF – We Create Chemistry
BASF Catalysts Division Drives Sustainable Solutions
Precious Metals
Base Metals (Battery)
10 November 10, 2020 I Clean Mobility Drives Metals DemandAuto demand has developed into dominant demand driver for PGMs
PGM demand as a share of the automotive market
100%
80%
Palladium
60%
Platinum
40% Rhodium
20%
0%
1980 1990 2000 2010 2019 2029
17% 10% 58% 69% 83% 88%
31% 41% 33% 38% 41% 50%
0% 82% 86% 78% 86% 90%
Percentages represent share of total yearly demand; 2029 includes Pt substitution in LDG catalysts
11 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF Market InsightTightening emission regulations are primary driver of metal demand
Timeline of current and future emission regulations
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Implemented Regulations Set To Be Implemented Anticipated Regulations
LD US Tier 3
CA LEV III
HDon US2010 + CARB optional low NOx CA UL NOx Phase I (0.05g BSNOx FTP + LLC) CA UL NOx Phase II (0.02g BSNOx)
EPA Clean Truck Initiative
US
CARB Advanced Clean Truck Initiative (ZEV Mandate: 5% in 2025, 55% by 2035)
HDoff US Tier 4F
GHG Phase 2 N2O / CH4
LD Euro 6d tem p Euro 6d Euro 6d (all) Euro 6e CF=1.0 Euro 7 Euro 8
CO2 95 g/km CO2 81 g/km (-15%) vs. 2021 -37.5% vs. 2021
HDon Euro VI D Euro VI E Euro VII
EU
HD CO2 review -15% vs. 2021 -30% vs. 2021
HDoff Stage IV Stage V
LD PL 5 PL 6 PL7 PL8 w / RDE
Brazil HDon Euro V P8 / Euro VI
LD BS 4 BS 6 CO2 113 g/km BS 6 BS 6 w /RDE
HDon BS IV BS VI BS VI PEMS BS VII
India
HDoff TREM III TREM IV TREM V
LD NS 5 NS 6a NS 6b w /RDE NS 7
HDon NS V NS VIa (2020: 50% NG; 2021: 75% Urban; 2022: 100% All Diesel) NS VIb (Full PEMS) NS VII
China
HDoff Stage III Stage IV + PN (est.)
LD Euro 6c Euro 6d Euro 7
HDon Euro VIc Euro VId w /PEMS Euro VII
Korea
HDoff Global 4 Global 5
LD 2009 Post New Long Term
Japan
CO2 113 g/km HDD GHG
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
LD – Current LD - set to be implemented LD - anticipated HDoff – Current HDoff - set to be implemented HDoff - anticipated
HDon – Current HDon - set to be implemented HDon - anticipated
12 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF Market InsightTighter regulations imply higher catalyst complexity
Increasing number of non-PGM catalyzed components in technology
2005 2010 2015 - 2025
▪ Real driving
LDD emissions testing
▪ Worldwide harmonized
light vehicle test procedure
▪ Advanced engine
LDG technologies
(multi-point injection,
turbocharge assisted,
lean burn, etc.)
▪ Non-PGM components
HDD SCR, SCRoF,
SCRoF(V), SCR(Z)
13 November 10, 2020 I Clean Mobility Drives Metals DemandPlatinum market overview
Market surplus will persist through 2022 followed by declining output from South Africa and Pt substitution
in gasoline catalysts pushing the market to deficit position; high stock levels expected to keep price muted
Pt market supply 2020 (k toz) Pt market demand 2020 (k toz)
15%
27% Autocat
South Africa 3%
3% Jewelry
Russia 39%
Chemical
6.8m toz 52%
Zimbabwe 10% 5.8m toz
Electrical
5% North America
Petroleum
Recycling
7% 9% Other
9% 30%
Pt market balance forecast (k toz)* Platinum missing out on the precious metals rally:
1,165 1,251 ▪ South African Pt supply severely impacted by COVID-19; to break
972 below 4m toz by 2025 led by production cuts and mine depletion
629
– Elevated Pd and Rh prices delaying mine closures in South Africa
▪ Substantial surplus balances through 2022 due to:
-68 -2,729 – Automotive demand to decline again in 2020
-626 – Light-duty diesel production declined 67% Q2 2020 vs. Q2 2019 in the EU
– Chinese Pt jewelry market continues to decline
-1,757 ▪ Ample above ground stocks and investment holdings (~17m toz)
2019 2020 2021 2022 2023 2024 2029 to alleviate potential future market deficits
* Demand includes Pt substituted LDG catalysts beginning 2021 which will spur demand
14 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF, SFA Oxford, Metals FocusPalladium market overview
Weak automotive outlook for 2020/2021 due to COVID-19 weighing heavy on demand; mid to long-term forecasted
Pt/Pd substitution in LDG and possible supply from announced Pd-rich mine projects
Pd market supply 2020 (k toz) Pd market demand 2020 (k toz)
4%
8%
22% 5%
31%
South Africa Autocat
2%
Russia Jewelry
8.9m toz Zimbabwe 8.8m toz Chemical
North America Electrical
Recycling Other
12% 31% 9% 81%
4%
Pd market balance forecast (k toz) Palladium price rallying despite market surplus
851 ▪ 2020 marks the first market surplus forecasted since 2010
▪ Delays in Pd-rich mining projects due to COVID-19
+737
317 ▪ Weak automotive sales continues to impact demand
114
▪ Positive signs emerging as China auto market (largest gasoline market)
-64 rebounds, with sales above 2019 for April – July 2020
-340 ▪ Higher Pd loadings on autocats due to tighter emission regulations
-586 -581 ▪ Pt substituted LDG catalysts to lessen future Pd demand
2019 2020 2021 2022 2023 2024 2029
15 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF, SFA OxfordRhodium market overview
Market remains tight driven by the recovery in Chinese automotive production and reduction of output
from South Africa due to COVID-19 shutdown; severe shortages of rhodium projected in the future
Rh market supply 2020 (k toz) Rh market demand 2020 (k toz)
7%
31% 8%
South Africa Autocat
Russia Chemical
0.9m toz Zimbabwe 0.9m toz Other
54%
North America
2%
Recycling
5% 9%
8% 85%
Rh market balance forecast (k toz) Rhodium market deficits to remain through FC period
▪ South African Rh supply severely impacted by COVID-19 (-22% YoY)
▪ South African supply expected to decline over the forecast period as
-47
-86 conventional mines begin to shutter
-162 -351 ▪ Higher Rh loadings on autocatalysts due to tighter emission regulations
– Continued gain in LDG market share at the expense of LDD
-335 -342
▪ Rh has higher activity for NOx reduction compared to Pt and Pd
making it difficult to substitute in an autocatalyst
-411 -398
2019 2020 2021 2022 2023 2024 2029
16 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF, SFA OxfordHydrogen economy: Decarbonizing industry/transport offers long-term
PGM demand growth from electrocatalysts for hydrogen applications
Hydrogen Ir Pt Pt Pd Ru Pt Ru Ir
Distribution End uses
generation
FCEV
FCEV
LOHC* LOHC* Pt
production conversion
H2 Fertilizer
Steel
Electrolyzers
H2
for H2 production
Green
syngas
Heat /
Power
Even a moderate emergence of the hydrogen economy could already consume a
significant portion of today’s Pt and Ir production.
* Liquid organic hydrogen carriers (LOHC) are organic compounds that
17 November 10, 2020 I Clean Mobility Drives Metals Demand can absorb and release hydrogen through chemical reactionsAgenda
BASF – We Create Chemistry
BASF Catalysts Division Drives Sustainable Solutions
Precious Metals
Base Metals (Battery)
18 November 10, 2020 I Clean Mobility Drives Metals DemandEV forecast will have a major impact on Ni and Co demand
for lithium-ion batteries
EV forecast comparison BEV plus PHEV Ni and Co demand sensitivity to EV forecast in 2030
(million vehicles) (kt)
39 +54%
40 1,500
>20
31
30 28 +59%
million 1,000
vehicles
20 17
12
500
10
+36%
+33%
3 8
0 0
2020 2022 2024 2026 2028 2030 15m 20m 25m 30m 35m 40m EV sales
WoodMac BASF Bernstein
Bernstein Benchmark BNEF
WoodMac LMCA BASF 2030 NiSO4 demand 2030 CoSO4 demand
Broad range of opinions on policy impact, infrastructure challenges, total cost of ownership parity, range anxiety, and consumer preferences
Cobalt is less sensitive due to its position in consumer electronics market and deemphasis in EV applications
Consensus of 8-12 million EVs by 2025, but 2030 deviates by >20 million vehicles
19 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF Market InsightShift towards high-Ni CAM will spur demand for nickel
at the expense of cobalt
Chemistry mix forecast Typical metal content
(%) (% CAM)
100% 48%
NCM 811
LFP/LMO 6%
90%
36%
LCO NCM 622
80% 12%
20% Ni Co
70% NCM 111
NCA 20%
0%
60% LCO
Low-Ni NCM 60%
50% LFP and 0%
Mid-Ni NCM
LMO 0%
40% 54%
NCA
5%
30%
20% High-Ni NCM
High-Ni CAM will result in higher energy density leading to increased
10% performance and range
Other
0%
China will dominate production for LFP driven by demand from
2016 2018 2020 2022 2024 2026 2028 2030 auto producers while vast majority of NCA will derive from Japan
High-Ni NCM expected to become the dominant battery technology,
impacted in the short-term by LFP
20 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF Market InsightNickel market overview
Use of nickel within Li batteries to increase as cell manufacturers continue technology shift toward high-nickel
cathode chemistries to increase vehicle range and battery energy-density
Ni market supply 2020 (kt) Class 1 vs. class 2 Ni supply 2020 Ni market demand 2020 (kt)
5%
Indonesia 26%
29%
Philippines 48%
38%
Class 1 Battery
New Caledonia
2,313 kt Class 2 2,292 kt Stainless steel
Russia
Other
Other 52%
15%
9%
69%
9%
9%
Class 1 Ni supply / demand (kt)* Class 1 nickel market expected to face a deficit 2026
4,000 Demand forecast total (class 1) Demand from the EV sector expected to triple by 2025 and exceed
Demand forecast battery 950 kt by the end of the forecast
Supply deficit
3,000 Forecasted deficits Expect BEVs to utilize >55% of high-Ni battery chemistry by 2030
Flexible class 1 supply
Current supply (nameplate capacity) Majority of supply growth will be from class 2 nickel as a result of
2,000 Nickel Pig Iron (NPI) producing mines in the Philippines and Indonesia
Innovations in HPAL nickel refining have the potential to meet class 1
1,000
nickel demand from batteries by the mid-2020s
0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
* Supply includes flexible supply of class 1 nickel (~300 kt)
21 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF Market Insights, Wood Mackenzie, Benchmark Minerals, BloombergNEFCobalt market overview
Cobalt contained in high-nickel cathode chemistry batteries still implies a significant growth trajectory,
with cobalt demand from Li batteries forecasted to grow by over three times by 2030
Co market supply 2020 (kt) Co market demand 2020 (kt)
7%
9% Africa Battery
33%
3% Russia Superalloys
37%
2%
4% Indonesia Hard materials
120 kt 89 kt
North America Catalysts
Other Other
75% 9% Recycling 6%
8% 16%
Co supply / demand (kt) Cobalt to shift to a deficit position beginning in 2028,
500 driven by continued growth from batteries
Forecasted deficits
Demand forecast total
Demand forecast battery
Cobalt has two innate properties that make it ideal for battery applications:
400 thermal stability and high energy density
Supply deficit
300 Current supply (nameplate capacity) DRC expected to account for ~70% of the global cobalt mined in 2020
200
Artisanal miners in the DRC account for an estimated 15% of global
cobalt supply
100 Demand forecasted to grow by 12% CAGR through 2030 propelled
by battery
0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
22 November 10, 2020 I Clean Mobility Drives Metals Demand Source: BASF Market Insights, Wood Mackenzie, Benchmark Minerals, BloombergNEFSummary
Evolution of new powertrain concepts and transformation of the automotive industry in full swing
Market Automotive industry being driven by tightening emission regulations and lower CO2 footprint
Strong growth momentum projected for battery electric vehicles (BEVs) and hybrids
Precious and base metals are vital to achieving the performance and needs of the automotive industry
Performance Electromobility creates opportunity for BASF; positioned to secure demand for emissions catalysts
BASF poised to enhance clean mobility through sustainably sourced metals
BASF is well positioned with its metal recycling and relationships with mines to support clean mobility
BASF’s Largest chemical supplier to automotive industry, unparalleled access and market knowledge
competitive Market leader in mobile emissions catalysts and battery materials with a strong technology position
advantage Global presence and regional R&D and production capabilities
Financial power to grow asset base and capitalize on market trends
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