The battery sector: trends and challenges

WHAT ARE THE TRENDS YOU OBSERVE IN THE BATTERY SECTOR? 

The sector is booming boosted by the fast increase in EV demand and further enhanced by the various US and European incentives and re-onshoring initiatives.

While the value chain brings together many stakeholders, there is still a need for better coordination between the upstream and the downstream, and a massive need for investment to develop mine capacity but also active materials and pre cam manufacturing.
There is, however, progress. We now see miners much more focused on the downstream, considering direct investments to build their own downstream capacities or looking to partner with industrial players. And reversely downstream players are now also looking to invest further upstream. OEMs, battery manufacturers have understood the critical importance of securing their access to supply of minerals, but they are also focused on the traceability of the supply and the need to demonstrate the sustainability of the production they source. 

WHAT ARE THE CHALLENGES FACED BY THE INDUSTRY? 

As mentioned, investment in the sector to ensure the supply of metals and minerals is still not sufficient to meet the increased demand linked to the energy transition, and recycling will only solve part of the problem. Unlocking private capital - from banks to private equity to financial sponsors - is therefore another component of the value chain that needs to be accelerated.

A lot of the minerals in demand are in challenging jurisdictions that require very prudent approaches. There's also the question of security of supply and national or regional independence, and then of course the question of the social acceptability of mines. Mining companies have a new and critical role in supporting the energy transition, but this should not undermine the way projects are undertaken. Policy and social discussions are therefore also central to the value chain. 

Battery manufacturing projects are accelerating and there is a need to move at a fast pace to meet demands from the market and also consumers and government expectations. Timing for progressing these projects is key as companies are looking for fast track developments. This is a big challenge as you have to align the supply side (minerals but also equipment), the permitting process, the equity, the debt financing, the offtake. There is a lot of willingness from all parties but it remains a delicate act to balance and align all the pieces under a compressed timeline. 

WHAT CAN SOCIETE GENERALE BRING TO THIS SECTOR?

New technologies, constantly evolving regulations, inflationary context and a moving geopolitical environment means that structuring of transactions and delivering liquidity will require strong support and expertise from a specialist bank. 

One of our key differentiating factor is the link we've managed to make between our historical activities and these new sectors, identifying early on how interlinked they are. We are able to leverage on our core skills and sector understanding to structure transactions, anticipate and solve some of our clients' issues. 

Our second strength is our ability to deliver the bank in a coordinated and jointed manner and provide our clients with global solutions including retail banking services, M&A and Investment advice, ECM or DCM services, and also to combine various liquidity sources, from traditional bank debt financing to export credit agencies and multilateral organisations. The integrated debt and equity approach is something clients value a lot. 

We are also making links between players active at different points of the chain, involving our automotive sector specialists, PE funds bankers, and also leveraging on our global presence to make links across the various regions and transfer the knowledge. 

We are becoming problem-solvers across the value chain, helping our clients to navigate new technologies, geopolitics and new regulations as they transition to net-zero carbon goals.