🏭 Lithium with a side of company

Good morning. BASF is saying that they are launching a $500 million cost cutting program—does anyone have ideas on what they'll cut first?

From the condenser:

· SK On and direct lithium extraction

· BASF's losses in Germany

· POTD: toothpaste

SK On just secured some lithium carbonate

SK Innovation subsidiary, SK On, has acquired a 10% stake in Australia's Lake Resources and signed an off-take agreement for up to 230,000 tons of battery-grade lithium carbonate over the next decade.

The lithium part of the battery:

Mining companies produce lithium carbonate or lithium hydroxide from one of two sources: (1) from lithium-containing brine, or (2) from lithium-containing ores. The lithium compound of choice is then combined with precursor metal oxide powders (PCAMs) to make cathode active materials (CAMs) like NMC, NCA, and LMO. We make cathodes by processing CAMs into thin sheets and rolling them up (with other important sheets, such as the separator and anode) into lithium-ion electrochemical cells. We call the combination of those electrochemical cells batteries.

So, what's the deal here?

That 230,000 tons is going to come from Lake Resources new brine project in Argentina's Catamarca Province. Instead of using open-air evaporation to concentrate the brine, Lake Resources is going to try direct lithium extraction (DLE) with Lilac Solutions' process technology to make an intermediate lithium chloride concentrate. Plants using their new process should have a higher recovery percentage, a higher purity product, and reduced water usage requirements (and they can be built faster!).

Zooming out:

SK On was carved out of SK Innovation about a year ago, and made headlines when they formed a joint venture (JV) with Ford (aptly named BlueOval City). That JV, plus an additional $1.5 billion in private equity funding, is driving a rapid expansion to make as many batteries as possible (Ford needs that F-150 Lightning). Doing that requires a secure supply of lithium, so buying a fraction of a miner in Argentina to sign long-term agreements makes a lot of sense.

BASF is expecting more losses in Germany

German chemical company, BASF, has announced a profit warning, a cost-cutting program, and job losses due to natural gas supply issues in Europe.

Some context:

BASF operates an enormous integrated petrochemical complex (with 200+ plants in it) over in Ludwigshafen, Germany. That complex requires copious amounts of electricity and heat to operate, both of which are generated by burning natural gas on-site. Unfortunately, the site is overly reliant on the supply of cheap natural gas from Russia, which it is not receiving nearly enough of.

So, what’s going on?

The natural gas supply crisis is realized in two ways for BASF: (1) less natural gas is available, and (2) whatever natural gas is available is more expensive. In order to compensate for what it cannot control, the company can then reduce its rates and increase the prices of its products. There comes an inflection point where the folks downstream cannot accept the price burden, and that’s when BASF starts to operate at a loss—which is exactly what happened in Germany last quarter. Unfortunately, it seems like that loss trend will persist, so BASF is buckling in and generating $500 million in cost savings to weather the storm.

Looking forward:

Remember, natural gas isn't just used to produce electricity and heat on-site, it's also used as a feedstock in the production of methanol (later acetaldehyde) and ammonia (later fertilizer). Reducing that over-reliance on Russian natural gas will probably look like a retrofitting of existing natural-gas-powered co-generation sites (so they can burn a larger fraction of oil) and new supply agreements. Swapping feedstocks for methanol and ammonia isn't really an option.

Some more headlines:

• Borealis is supplying Tupperware with its recycled polypropylene

• Clariant built a tool to help its customers find the ideal additive for their paint formulation

• Dow Chemical is paying its shareholders a 70-cent dividend

• BASF broke ground on a new Polyurethane Application Development Lab in Mumbai

• California banned the use of plastic produce bags starting in 2025

Product of The Day:

Today, we're breaking down toothpaste.

Okay, everyone has used toothpaste (or at least hopefully that's the case), so everyone should at least have an idea about what's in these tubes. Something to do with flourine... right?

You can think of toothpaste as a blend mostly consisting of abrasives (such as sodium bicarbonate and calcium carbonate), humectants (like propylene glycol), water, a surfactant (usually sodium lauryl sulfate), and then all the goodies like flavors, colors, and a tiny amount of calcium fluoride. The abrasives rub the gunk off your teeth, the humectants keep the paste moist, and the surfactants to create bubbles to evenly distribute everything.

In case you're interested:

• Book: The Alchemy of Air is a must-read for anyone interested in the chemical industry. It's the story behind the Haber-Bosch process that lead to fertilizer—and explosives.*

• Safety Moment: Chevron's Richmond Refinery caught fire in 2012—take a moment to learn why.

• Podcast: Check out this episode featuring Dr. Anders Hallsby on water treatment technologies and trends.

• Course: Want a complete overview of the major petrochemicals and how we make them? This will cover all the bases.*

The bottoms:

All views represent those of the author not their employer.