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Johnson Matthey to produce new battery material in 2021-22

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By Barbara Lewis

LONDON (Reuters) – Chemicals group Johnson Matthey <JMAT.L> said on Thursday it expected to start production in 2021-22 of a battery material it has developed with improved performance and reduced cobalt content to contain costs.

The company has long relied on demand for its technology to curb emissions from diesel and gasoline vehicles, but said in September it was preparing for the shift to electric drives by investing 200 million pounds in developing next-generation technology.

The new plant will be in Europe and should be producing at the start of the next decade, but Johnson Matthey has yet to decide where to build it, Chief Financial Officer Anna Manz said in a telephone interview.

Tests so far showed good performance from the material known as enhanced lithium nickel oxide, or eLNO, which has a higher energy density than existing technologies, she said.

“The key measure is cost per kilowatt hour – how much power for the lowest cost,” Manz said. “It will minimise cobalt to reduce the cost.”

Lithium cobalt oxide has been the most widely-used cathode material in lithium batteries, but cobalt prices <CBD3> have surged because of concern over supplies, the bulk of which are concentrated in Democratic Republic of Congo (DRC), where producers, such as Glencore <GLEN.L>, have clashed with the government over its law to raise royalties and taxes.

Johnson Matthey still sees profit in supplying technology to curb emissions from gasoline and diesel vehicles.

Manz said it would increase its market share of the diesel light duty market in Europe to 65 percent from 45 percent over a roughly three-year period to March 2019, following a scandal over diesel engine emissions.

“Our technology allows the auto-manufacturers to go to significantly higher levels of air cleanliness,” she said, adding the company was also well-placed to help car manufacturers meet ambitious air quality standards in China.

Johnson Matthey’s investments have eaten into cash flow and annual operating profits were flat, but analysts said the company was in a strong position.

Its shares were up around 2 percent at 0820 GMT, taking this year’s gains to 13 percent.

The company, in its results for the year to March 31, declared a 7 percent increase in its final dividend and said it expected mid-to-high single-digit growth in operating performance over the medium term.

Analysts said the results were mostly in line with expectations, although the dividend was ahead of the consensus forecast.

“Johnson Matthey remains one of the most attractive stocks in EU chemicals,” Morgan Stanley said in a note, reiterating its “overweight” rating on the stock.

(Reporting by Barbara Lewis; Additional reporting by Arathy S. Nair in Bengaluru; Editing by Mark Potter)

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