LIB electrolyte manufacturing in India | Understanding the supply chain

The value attributed to the electrolyte in lithium-ion cell manufacturing ranges from 6% to 10%. Neogen Chemicals (NCL), incorporated in 1989, is a leading manufacturer of bromine and lithium-based specialty chemicals. This interview with Dr Harin Kanani, the company’s Managing Director, focuses on Neogen Ionics, a wholly-owned subsidiary of NCL, and its initiatives in the battery chemicals business, focusing on electrolyte and electrolyte salt production.

NCL has over three decades of expertise in lithium chemistry. Please tell us more about your work with lithium-based chemicals.

Neogen was founded by my father, who, like myself, is a chemical engineer from IIT Bombay. One of the first derivatives he produced was lithium bromide, which began our lithium journey in 1985. At that time, Neogen was a proprietary company operating out of a small 600-square-foot space, producing lithium bromide in 20-liter batches. As the business grew, my father set up our Mahape unit in New Bombay which required a larger investment, leading to the formation of Neogen Chemicals Private Limited. Neogen officially started operations in 1991, but our work with lithium began in 1985.

Based on lithium bromide, we began producing other lithium salts, such as fluoride, nitrate, and sulfate. Even now, nearly 20% of Neogen’s revenue comes from lithium chemistry.

What are the end uses of these lithium chemicals, and which industries do you supply them to?

The largest application is in environmentally friendly cooling solutions. We supply to markets not only in India but also in Korea, Japan, and China. Additionally, these lithium products are used as catalysts in pharmaceutical API manufacturing. Neogen also has an organic chemical business serving the pharma and agro sectors, using some lithium molecules. They’re also catalysts in speciality polymers and dehumidification systems. You might have heard of oxygen generators— during COVID, many of these compact systems use lithium compounds in their molecular sieves. At one point, we even supplied a lithium compound for developing photographic film to all Kodak plants, though the demand ended with the advent of digital cameras. Over almost 40 years, we have supplied lithium salts to 7-8 different industries.

Please tell us about the incorporation of Neogen Ionics in 2023.

Neogen Ionics was incorporated as a separate business in 2023 once we fully understood the potential of the battery chemicals market. However, our interest in this area began in 2017-18.

The price of lithium, which had remained relatively stable from 1985 to 2016-17, suddenly increased by two and a half times in just six months. Our partners in lithium mining explained to us how rapidly the EV market was growing and how this was driving up demand for lithium. Our strong business connections in Japan helped us identify lithium compounds for cathodes and electrolytes. We were already producing materials like lithium chloride and lithium fluoride for non-battery applications. We focused on developing technology to purify lithium components to battery-grade standards, including lithium chloride and fluoride.

We also initiated our third site in Dahej to produce standard lithium compounds. During the lockdown, we focused on understanding and developing the chemistries and technologies needed for battery-grade lithium derivatives like LiPF6 and LiFSI, which are used as electrolyte salts and additives. We also decided that the best path forward for Neogen was to concentrate on the final electrolyte formulation.

By 2020, we were ready with this plan, and by 2021-22, we began making progress. We started engaging with ARCI, CSIR-CECRI, and other institutions to understand their requirements for electrolyte chemicals and formulations.

After COVID, the global demand for batteries increased even further, and we saw growing interest in our business. We were in constant communication with our Japanese customers, and as the scale of our required investment became clear—more than double what we had invested in Neogen over the past 30 years—we realised that this new venture warranted a dedicated subsidiary, which led to the
creation of Neogen Ionics.

Could you help us understand the value chain for electrolyte production?

Electrolytes generally have three main components.

• The first is the electrolyte salt. Two or three common electrolyte salts are typically used.
• The second component is the solvents—there are about five or six organic solvents in which the electrolyte is dissolved.
• Finally, there are additives, which can be divided into lithium-based additives and organic additives. There are around 15 to 20 additives in total, with about five or six being lithiumbased and the rest organic.

When it comes to producing a specific electrolyte, the battery maker or electrolyte manufacturer usually selects one or two electrolyte salts, the most common being LiPF6 (lithium hexafluorophosphate) or LiFSI. Out of the five or six organic solvents, they typically choose two or three, depending on their cell design. Then, from the 15-20 additives, they may select anywhere from one or two to as many as five, depending on the complexity of the cell’s application.

In terms of value, 50-60% of the cost comes from the salt, 30-35% from the solvents, and the remaining 15-20% from the additives.

Considering that salt is a major component, can you walk us through its value chain? Starting from lithium, where does it all begin?

Neogen has been working with lithium for the last 30 years. We source lithium from mines in Chile and Argentina. Additional mines and refining operations are now emerging in Australia. Typically, these mines produce technical-grade lithium, with a purity of around 99.3-99.4%. If it’s a battery grade, it might be slightly higher.

However, electrolytes require a much higher purity than even the standard battery-grade lithium carbonate—around 99.8-99.9%. The first step is to purify this lithium to the required level of purity.

Then, it gets converted into lithium fluoride or lithium chloride as a salt. From there, it can be further processed into complex lithium derivatives like LiPF6, LiFSI, or other lithium-based additives such as LiPO2F2 and LiBOB.

Neogen has proprietary technology for electrolyte salt production. We began developing it step by step in 2018. By 2019, we had figured out how to produce high-purity intermediates, and by 2021, we could develop LiPF6, LiFSI, and several other additives. We’ve already developed four or five key molecules in our lab, including NaPF6.

LiPF6 is currently the most significant, followed by LiFSI. These are being scaled up for commercial production. The remaining molecules are still in the lab stage.

We start with lithium carbonate directly from the mine, purify it, produce the purified lithium salts, create the complex lithium derivatives, and formulate the electrolyte used in the cells.

Does Neogen also handle solvent and additive production?

• For solvents, the starting point is crude oil. Refineries produce ethylene or propylene oxide, which is used in petrochemical plants. These solvents are typically produced in large capacities —100,000 metric tons, 200,000 metric tons, or higher. Given the required scale, it’s not economically viable to set up our own solvent plant. Instead, we purchase solvents from established producers in Europe, Japan, China, the Middle East, and Southeast Asia. We currently buy battery-grade solvents, but if we set up a larger facility in the future, we could source technical-grade solvents from refineries and then purify them ourselves to meet batterygrade standards.

• We manufacture lithium additives from scratch. If specific organic additives are needed, we will either purchase them from companies in India that are already producing them or produce them ourselves if necessary.

You have a technology license from MUIS Japan for electrolyte production. Please tell us more about this partnership.

We already have a 2,000-metric-ton plant operational that can produce electrolyte using our own technology. This setup supports approximately 4 to 5 GWh of production for NMC batteries or about 2 GWh for LFP batteries. As companies like Ola and Amara Raja ramp up their Giga factories, our facility is equipped to meet the initial demand for electrolyte in India.

In parallel, we began working with MUIS in April 2023. MUIS (Mitsubishi Ube Ionic Solution) is a collaboration between Mitsubishi and Ube, both long-established in the electrolyte industry. They have been producing electrolytes for over 30 years, not just in Japan but globally. As battery technology expanded to Europe, the U.S., and China, they established plants in each of these regions. Despite their extensive global presence, they had never previously licensed their technology to another company, making our license particularly significant.

We provided them with all the necessary information obtained by coordinating closely with manufacturers who were planning to produce cells. MUIS used this information to design a plant capable of producing 18-20 different electrolyte recipes, incorporating various additives and formulations.

This upcoming plant combines the diverse knowledge of its Japanese facility with the large-scale operations of its US plant. The design is complete, and construction is set to begin.

This new plant in Dahej will have a capacity of 30,000 metric tons (30 KTA) of electrolyte production. Once operational, it will support nearly 30 GWh of battery production. We expect the plant to come online in the second half of 2025, with a trial run targeted for Q3 and full readiness by December 2025.

What scale of investment are you planning for this project?

The announced investments cover more than the electrolyte. The 30 KTA plant will serve the Indian market for electrolytes, but salt production is aimed at the international market.

Currently, outside China, only four companies are capable of producing LiPF6: one Japanese, one Korean, Neogen, and another Indian company. Together, these companies account for only 5% or 6% of the global demand. Given the importance of having non-Chinese sources for critical minerals, there is a strong global interest in expanding production.

The investment amounts to approximately ₹1,500 crores, covering the infrastructure requirement for producing 30 KTA of electrolyte and around 5,500 metric tons of salts. Additionally, we have developed a 65-acre complex. This complex will house initial facilities and has the potential for future expansion up to 100 KTA for solvents and 20,000 KTA for salts. We also have 20 acres set aside for LFP or LMFP cathode active material production, with the necessary technology partnerships and environmental clearances in place. We are awaiting customer interest to fully utilize this land.

Is the export focus primarily on salts rather than electrolytes?

Transporting electrolyte poses a challenge, and it’s preferably produced locally. The export focus is mainly for electrolyte salts, which make up 10-15% of the total volume. For instance, 1,000 tons of electrolyte for a 1GWh battery only requires 100 to 150 tons of salt.

Consider Mitsubishi, which operates electrolyte plants in Japan, China, the UK, and the US. Despite this, they do not produce salt locally; it is sourced from Japan or China. The logistics and challenges are similar when transporting salt from India. The primary challenges are chemistry and salt purification, where Neogen’s expertise becomes advantageous.

Do you feel confident that the electrolyte salts produced at your end will be cost-competitive compared to those from China and other established facilities?

We are more cost-effective outside of China. Regarding China, their pricing can be highly variable, with prices sometimes being below or multiple times above cost. Our approach is to ensure that our margins are protected reasonably, even if we adjust prices based on lithium variation. Our analysis found that a fixed, formula-based price from Neogen can offer significant savings compared to spot prices from China.

It is important to note that depending solely on China for critical raw materials can be risky, even if there’s no specific regulatory requirement like the IRA for the US supply chain.

For large-scale operations (e.g., 500 GWh or 1,000 GWh plants), depending on China for a small percentage of raw materials (2-3% for electrolytes) can be risky. Neogen, alongside another Indian company, offers a reliable alternative with high-quality electrolyte salts and a broad range of additives and molecules, giving customers a robust option beyond just the primary electrolyte salt.

You’re already sending out samples for customer qualification. Typically, how long does the customer qualification process take?

The process of qualifying the salts is relatively straightforward, taking 3 to 6 months. Customers focus mainly on chemical properties, making it simpler to qualify.

Qualification of the electrolyte is more complex. This process can take up to 1.5 to 2 years. We start with 30 to 40 different recipes, then narrow it down to 5-6 recipes, which we test at a scale of 20 kilograms or 20 litres. Further testing at a few hundred litres helps us determine the best performing recipe. This final recipe is scaled to production levels, supporting tests on 10,000 to 1 million cells. Throughout this process, we engage in iterative testing, adjusting additives and concentrations based on performance in various conditions.

For some customers, we send samples to their technology partners in places like China or Japan for evaluation, which also takes about 3 to 6 months. In cases where customers have a clear electrolyte recipe, they can test it directly, which also takes about 3 to 6 months. Currently, in India, there are only one or two companies with pilot lines where we can provide trial quantities, so we depend on these facilities’ availability.

Do you have any policy recommendations or suggestions for the industry that could help strengthen the value chain in India?

Investing in CAM (cathode active materials) or scaling up electrolyte salt production for a significant global market share—such as 10% or 20%—requires substantial capital. Historically, export incentives of around 5% to 6% have been provided for chemical companies and other industries. Still, there are no specific export incentives for electrolytes or battery materials, putting us at a disadvantage against China. Despite not making money today, our only strategy is to hope for profitability in five years.

From a policy perspective, timely anti-dumping measures are crucial to counteract potential Chinese price dumping, similar to the issues the solar industry faces. Additionally, India has significant potential to produce materials like electrolytes, anodes, and cathode precursors. Support for more aggressive R&D and investment in larger-scale facilities would be highly beneficial.

We started with a small R&D lab and expanded to a larger one to produce electrolyte suitable for 2-3 GWh scales. Additional government support could significantly accelerate this process as we aim to scale up to 30-50 GWh and eventually 100-200 GWh. Without such support, we will need to progress step by step, hoping to secure market share before other countries, aside from China, take it.

India has a unique opportunity with its local market and ongoing cell production. If the government supports material producers and cell manufacturers, we could surpass the 150-200 GWh targets and achieve even greater growth.

This interview was first published in EVreporter Sep 2024 magazine.

Also read: India’s lithium-ion cell supply chain- leading players and plans