China dominates BloombergNEF’s (BNEF) lithium-ion battery supply chain ranking in 2020, having quickly surpassed Japan and Korea that were leaders for the majority of the previous decade.

China’s success results from its large domestic battery demand—72GWh—and control of 80% of the world’s raw material refining, 77% of the world’s cell capacity and 60% of the world’s component manufacturing, according to data from BNEF.

In 2020, Japan and Korea rank number two and three respectively. While both countries are leaders in battery and components manufacturing, they do not have the same influence in raw materials refining and mining as China. What they lack in the control of the raw materials supply chain, they make-up for in higher environmental and RII (regulations, innovation & infrastructure) scores compared to China.

China’s dominance of the industry is to be expected given its huge investments and the policies the country has implemented over the past decade. Chinese manufacturers, like CATL, have come from nothing to being world-leading in less than 10 years. The next decade will be particularly interesting as Europe and the US try to create their own battery champions to challenge Asian incumbents who are already building capacity in both places. While Europe is launching initiatives to capture more of the raw material value chain, the US is slower to react on this.

—James Frith, BNEF’s head of energy storage

BNEF’s lithium-ion battery supply chain ranking provides a snapshot of a country’s position in 2020 and where it will place in 2025, based on its current development trajectory. The work ranks countries across five key themes related to the supply chain: raw materials, cell & component manufacturing, environment, RII and end demand (across electric vehicles and stationary storage). The five key themes were given equal weightings in the overall ranking.

As EV demand grows there is an increasing need for cell manufacturing facilities close to automotive production. This has led to a boom in European cell plants, and the rest of the supply chain is also slowly making its way to Europe. The growing industry within the region and Europe’s strong environmental credentials helped five European countries place in the top ten ranking for 2020.

BNEF’s 2025 rankings are based on a country’s current trajectory, but if a country enacts targeted policy and regulations there is ample time to improve its position. The US is in sixth place in 2020. If the US were to increase its investment in raw materials and promote EV adoption, it could overtake Japan and China to be number one in 2025, BNEF claimed. In contrast, the UK could see its position in the rankings fall in 2025 if it becomes unable to access the large demand in continental Europe, which, at 152GWh, will be around five times the size of its domestic market.

A key concern of many raw materials producing countries is how to leverage resource wealth into more value-add, and attract further downstream investments, like battery manufacturing. Key distinguishing factors are the environmental footprint of industry, the availability of cheap but clean electricity, a technically skilled labor force, and incentives driving battery demand. These factors may be more important than a monopoly on one specific critical metal.

—Sophie Lu, head of metals and mining at BloombergNEF

Sustainability and carbon emissions associated with the supply chain are of growing importance. Making sure that the electricity used in material processing and cell manufacturing is low-carbon is critical to meeting lifecycle goals. France performed best in the environmental category, helped by its electricity grids low carbon emissions factor, at 28gCO2/kWh in 2019.