The deal represents the first time the material will be made at gigafactory scale in the U.S.
Redwood Materials said it plans to produce 100 gigawatt-hours of cathode for 1 million EVs from recycled battery cell material by 2025 at its $3.5 billion battery materials factory under construction near Reno, Nev. The plant is near Redwood's headquarters in Carson City, Nev.
Panasonic will use Redwood's cathode material for battery cell production at a $4 billion lithium ion battery factory it is starting to build in De Soto, Kan. The factory is expected to open in 2025 and create up to 4,000 jobs, Panasonic said this month.
With the agreement, Redwood also hopes to make a sustainable closed-loop supply chain for producing cathode material and batteries in the U.S. In closed-loop supply chains, industries efficiently use their production byproduct and waste to create new products, preserve resources and save energy.
Currently, newly mined or recycled metals from the U.S. are first sent to Asia, where most of the world's electric battery infrastructure and manufacturing expertise is located, for refinement. The materials are then sent back to battery cell factories in the U.S., enduring a 50,000-mile-plus supply chain, according to Redwood Materials.
Redwood said the U.S. could lose more $100 billion if it continued to import the more than 2 million metric tons of cathode through the year 2030 that are needed to keep pace with domestic electrification plans and increased EV demand.
"The biggest story in the industry over the past year has been the base price of commodities," Michael Ramsey, a Gartner Inc. transportation and mobility analyst, told Automotive News.
The price of lithium and other metals used to make EV batteries has exploded as demand has increased and the COVID-19 pandemic has roiled global supply chains.
Lithium, the main component of an EV battery, reached an all-time high of $74,500 per metric ton in October. In early 2020, at the beginning of the pandemic, lithium was trading at $6,000 per metric ton.
The increased demand for EVs is creating a kind of virtuous cycle for battery production in the U.S.
"At one point, with recycling these metals, there was no business model, it cost too much money," Ramsey said. "But now since we're producing so many more batteries for EVs, the scrap materials being produced are significant."
Redwood expects to produce 500 gigawatt-hours of anode and cathode per year, enough to power 5 million EVs and meet the U.S. 2030 goal of having zero-emission vehicles make up half of all new-vehicle sales.
Cathode material is made up of cobalt, nickel and manganese in crystal form. During the battery making process, these oxidized metals are added to lithium.
Redwood said its anode and cathode material will have a high recycled content of lithium, cobalt and nickel, making it the most sustainable battery material available.
Panasonic will also be the first long-term client for Redwood's anode copper foil, another essential component in lithium ion batteries.
Redwood was started in 2017 by former Tesla chief technical officer JB Straubel. It began working with Panasonic in 2019, when it began recycling battery cell scrap for the Japan-based conglomerate.
Financial terms of Redwood and Panasonic's agreement were not disclosed.