Sodium-ion batteries may be about to quietly disrupt China’s battery market. CATL, the world’s largest battery maker, said this week that it would start commercial production of the technology this year.

At a slick “Tech Day” event in Shanghai CATL launched its second-generation of sodium-ion batteries, highlighting how they perform better in lower temperatures and can power an electric vehicle almost as far as some current lithium-ion batteries on the market. The event was full of videos showing the batteries being charged and used in frigid snowy conditions.

The lithium industry is paying close attention—because if CATL can cut sodium-ion costs, it could start displacing lithium and reshape future mineral demand forecasts.

The two world’s largest battery producers, CATL and BYD, are innovating at a rapid rate, driven by the increasingly competitive electric vehicle market in China. That makes forecasting battery mineral demand by 2030 or 2035 increasingly difficult.

It would certainly be foolish to bet against CATL. China’s battery market can change rapidly, in a way that can dramatically influence the minerals that are needed by the industry. A few years ago people expected that Chinese people would be driving cars with batteries containing cobalt from the Congo - but that’s not the case anymore. Lithium iron phosphate (LFP) cells that have no nickel or cobalt make up 80% of the Chinese market.

Now CATL says it expects sodium-ion batteries to take half of the market of current LFP lithium-ion batteries, without giving a timeframe.

Asked on Friday if the costs of sodium-ion batteries could come down, CATL said in a response:

The company is currently developing the second generation of sodium batteries, performance indicators have been close to lithium iron phosphate batteries. As long as they can be used on a large scale, the cost of sodium batteries will have certain advantages over lithium iron phosphate (LFP) batteries.

Better sodium-ion batteries

Sodium batteries and lithium-ion batteries work in the same way, the only difference being the use of materials. Instead of lithium ions shuttling between the cathode and anode in the battery it is sodium ions instead.

Compared with lithium batteries, the energy density (the amount of energy the battery can store) of sodium batteries is a little lower, but CATL says the safety performance and low temperature performance is better.

CATL has increased the energy density of sodium-ion batteries by using self-forming anode technology, allowing a longer driving range of 500 kilometers.

It says its sodium-ion batteries can now reach a gravimetric energy density of 175 Wh/kg, up from 160 Wh/kg in its first generation, which is comparable to LFP batteries on the market.

Currently sodium-ion batteries are mostly used for large energy storage installations and shipments are small. Shipments of sodium-ion batteries last year were only around 4 gigawatt hours, a fraction of the over 1 terawatt-hour of lithium-ion batteries shipped.

China’s EVTank forecasts that shipments of sodium-ion batteries will only rise from 3.7 GWh last year to 109.3 GWh by 2030.

CATL also announced a smaller 24-volt sodium-ion battery for use as a start-stop battery for heavy duty trucks, to replace lead-acid batteries, which it said it will start producing in June. This will especially help truck drivers in colder provinces, it said.

Chinese research company GGII estimates that the market for these start-stop batteries will reach between 250 to 350 GWh by 2030, with sodium-ion batteries potentially making up 15 GWh of this market.

Energy security: the advantage of sodium-ion batteries

China has a number of incentives to develop a commercial alternative to lithium-based batteries:

ENERGY SECURITY: China relies on imports of lithium minerals to meet 70% to 80% of its demand, an import level similar to oil. Relying on imports of lithium is not a good strategy amid a global trade war, where Donald Trump is pressuring countries to cut deals with the US in order to avoid tariffs. This week China warned countries “against striking trade deals with the United States at Beijing’s expense,” in a sign of its concerns.

ENVIRONMENTAL: China’s domestic lithium reserves have a high carbon footprint as they are lower grade than the best mines overseas. Importantly, CATL said the carbon footprint of producing sodium-ion batteries can be reduced by 60% compared to lithium-ion. That’s a big deal due to the scale of CATL’s emissions, which I wrote about here. CATL emissions were 118 million tonnes CO2e of greenhouse gases last year.

COLD WEATHER: Sodium-ion batteries work better in the cold. CATL said its new sodium-ion batteries can work in lower temperatures of down to -40°C, which is how cold it can get in China’s northern provinces of Inner Mongolia and Heilongjiang. These northern provinces are also some of the heaviest industrial provinces with the highest emissions. Together over 50 million people live in these two provinces.

The future of battery technology

Longer-term, it makes sense to electrify the global energy system using batteries containing the most abundant minerals. CATL’s Ouyang Chuying said sodium is 421 times more abundant than lithium in the earth’s crust.

“It is a choice between drilling water in the desert or getting water from the ocean,” he said.

In the short-term given CATL’s scale - it was the world’s largest electric battery producer for the eighth straight year last year - a spike in lithium prices, or a shortage of supply, is hugely damaging.

Since no one can forecast the lithium price, sodium-ion provides an alternative for CATL. If lithium prices spike, then its sodium-ion batteries are suddenly more cost competitive. Producing more of them could in turn also help deflate high lithium prices.

For the near-term, the solution may lie in mixing and matching. CATL said it would also offer a mix of battery chemistries within one pack. So using the sodium-ion batteries to allow low-temperature operation, and the LFP cells to boost range. That would enable electrification of China’s colder provinces, opening up new markets.

Moving fast

CATL’s sodium-ion play might not dethrone lithium just yet. But if history is any guide, China’s battery tech can change faster than anyone expects.

As I said earlier, look at the remarkable rise of cheaper lithium iron phosphate (LFP) cells. Between 2014 and 2019 the battery industry in China shifted to higher energy density nickel cobalt manganese (NCM) cells for use in passenger cars. Many people thought this trend would continue. But then it rapidly reversed, as China’s subsidy policy changed and cost was prioritised.

Part of this was also due to CATL’s development of its cell-to-pack battery technology in 2019, which increased the energy density of its LFP battery packs by removing the battery modules, allowing the batteries to be used in more cars. This helped propel mass adoption of LFP cells, with Tesla starting to use the technology in 2020.

Could we be seeing a similar technological change now?

The key lesson is that predicting future mineral demand for 2030 or 2035 based on today’s technology is not likely to be accurate. Unfortunately there is a fundamental mismatch between the length of time it takes to develop a mine, and our visibility over future mineral demand.

The most accurate assumption is that battery technologies will keep getting cheaper and better, unlocking new applications and new uses. Such as replacing lead-acid starter batteries in trucks.

As a result it looks like China’s energy transition is only going to accelerate. Given the pace of innovation, the most certain bet in China may be to bet against diesel and gasoline demand.