afternoon, everyone, and welcome to Stora and Stora's teaching in node, making batteries out of trees. I'm Ula Bayernan, head of investor relations at Storanso still until the end of q two result q three announcement of result. This event is being recorded for internal purposes. If you do not want to be part of recording, please feel free to leave the Teams meeting. Our team presenting and taking the questions today are Markus Manstrom, head of biomaterials division Lauri Leightonen, Head of Innovations at Biomaterials and Stefan Walther, Director, Emerging Business, Bio Based Carbon.
If you want to ask questions, please write them to the chat box. I will then read them to the audience. We will keep the participant slides muted the whole event. The slides will be available on our website after the event. So now I will hand it over to Markus.
Markus, please go ahead.
Thank you, Ula, and welcome also on my behalf. It's truly fascinating that we have come this far on the road. As we all know, LingNode is one of the biggest opportunities that we have at hand. We will today provide you with a teach in on what is really LingNode about. We will also talk about how do we believe we can scale up this business opportunity.
But before I hand over to Lauri and to Stefan, let me share a short, very short story about our our R and D innovation work in the division. Innovation reviews since 2016, 2017. And in the innovation review in 2018, just before Christmas, Stefan and the team had made a small surprise for us. I have always been pushing for make demonstrators, show something visible. Well, just before Christmas in 2018, Stefan and the team lit the first small Christmas tree that was then energized by the first battery made with our rendered material ever.
And to everybody's surprise, this small Christmas tree with some small leads, it was shining bright still until Easter the following year.
So with that, I hand over to Lauri. Please take the floor. Thank you, Markus. What a nice story. Thank you.
So with this, before we wanna start and go deep into the teaching, I think we should start with the welcome movie to give you guys a little bit of a flavor and a big picture. So why don't we kick the movie?
The future is electrifying. In just a few years, we've seen huge leaps in technology, electric cars, handheld devices, alternative energy sources and robotics. We rely on electricity in almost all parts of society, which means that batteries are becoming all the more important as well. In fact, in ten years, battery production is expected to increase tenfold. So what if you could make batteries more sustainable than today by making them from trees?
Well, you could, at least partly. Today, lithium ion batteries consist partially of graphite, which is often obtained or produced under less than satisfactory conditions. So what we're doing now is replacing fossil based graphite with renewable hard carbon. There's a material called lignin found in trees. It's actually one of the most common materials in all of nature.
In the production of cellulose fibers, lignin is separated and usually just burned for energy. But why not put it to use instead since millions of tons of lignin is produced every year? By refining this material, we can turn it into hard carbon and replace graphite in the anode part of the battery. The the the successful to to decision
with
The technology is already here, and it could be used for thousands of different applications. We are now scaling up production to be able to offer this solution to the market soon. Join us in the eco evolution by making batteries from trees.
Wonderful. And for those who didn't have a good enough connection, this video is available on our website, and we'll share the information later on where the link can be found. So, as we heard in the movie and our little video that the world is electrifying. And a lot of this electrification is driven by the electrification of mobility so, electric vehicles. And this electrification of the world is driving a lot of demand of new technologies.
And especially, in the centerpiece of this transformation is the battery. And the battery technologies and the development of that value chain is taking huge, huge leaps. And to an extent that we have more than 200 gigafactory projects announced or in production stage globally that right now and these projects and gigafactories needs a huge amount of raw materials. So the raw material demand The typical gigafactory, let's say 20 giga watts needs about 20,000 tons of anode raw materials, which we will be talking about today.
This is a significant amount, especially when multiplied with the amount of gigafactories that is currently in planning. With the estimation of corresponding the potential volume of maybe more than 3,000,000 tons in the next ten years. So the demand of raw materials, demand of batteries is increasing significantly. And this is a transformation that's happening, and I think we have a lot to offer in this transformation. In addition, what's happening is the sustainability demand in this value chain is increasing.
In fact, driven by the fact that 50% of the upfront carbon footprint of an electric vehicle comes from the battery itself. There's a huge demand from the value chain to look at more sustainable solutions to address that challenge. And with this, I'd like to start telling you how do we do this and get a story on where do we move and where this all started. So Stefan, can you take us forward with the basics and what we're trying
to do here? Sure, sure. Thank you, Lauri. Ladies and gentlemen, to understand how we connect to this opportunity of the battery industry really taking off and going into all sectors of industry and then, of course, having electric mobility as the major driver, we need to take a look at the technology, which we will do in brief, and then explain how we do that from tree, fulfilling our mission that everything that is done from oil and fossil based raw materials today will be made and can be made from trees tomorrow. So the next slide will show us the basic principles of a battery.
Now in order to store electrical energy, it usually requires two sides. And those are usually labeled anode and cathode, which are separated by a perose film or sheet through which the ions can travel, but the electrons cannot travel. So important to say, cathode on one side, that's a material that is a lot talked about, and it's about the metals in it. Most batteries today still have a lot of cobalt in it. There's trends to also mitigate those issues and challenges.
And on the other side, most batteries still today consist of carbon material, which then forms the anode. On the next slide, we will see the basic principles in the functionality of a battery, where both materials, the anode material on one side and the cathode material on the other side, are basically hosting the lithium And during charging, the lithium are migrating into the anode. The anode needs to take up these lithium and during discharge, they are migrating back into the cathode material. The electrical current flows then through the connectors and driving whatever device is powered, of course, at best, a nice, fast electrical car or any other device, really. And this process of the moving of the is a key, what we are going to look into in a second, why our material makes a lot of sense in this application.
The next slide we see here some aspects on the current material. Roughly 90% or even more, depending on which statistics you're looking up, use a graphite anode today. Graphite is a material that's been used for this application for decades, and it's been developed and out developed for a while. There are some problematic aspects, like with every fossil based material, often is produced under less than these satisfactory conditions. It is made from a fossil fuel.
There is a lot of CO2 generated when it is generated. And other materials are mined and ripped from the ground, then they need to be cleaned. And also all those processes are often not as clean and not as we would like have then technical parameters and performance indicators, which are being looked at in many, many ways and also in competing concepts. One of them is the ability to accept the lithium ions in slow and fast charge applications. So in a short time, a lot of ions that need to be taken up.
And those factors to proving will be our angle of attack with our materials. So in the future concept, on the next slide, you see that battery using our material is gonna look very much the same. So on the left side, you see the concept that has a graphitic carbon as the anode to accept the lithium ions during charging. We will bring a material. We have a material, we call it lignode, which can accept the ions and which can replace either fully or in parts the graphite that you see on the left side in conventional concepts.
Lorie, take us into the world of Lignode, please.
Thank you. We will be generating a product that's called renewable hard carbs. And so what are these? What are these renewable hard carbs? So if we look at the next slides, our hard carbon that we manufacture is made out of lignin.
Lignin the tree consists about 30%, 40% of lignin. And traditionally, this lignin in pulping process is actually used as a fuel and as a biofuel. And this we have generated the technologies to extract this lignin and then take the lignin into value added production. There are millions of tonnes of lignin produced in Europe alone, and this is circulating a lot in the pulp mill systems. And there's an ability to extract more and more of that.
What's wonderful thing about this is when we're doing this extraction, we're not increasing the amount of trees that have been used, but we're putting more value added spin to it and adding more features and benefits to a very valuable raw material. And what's wonderful, it's coming it's a raw material that's coming from traceable and certified resources. So we have sustainable forestry practices that yields eventually a lignin that we can then value add into higher value products. And this is what we've created here. So for the past, I would say, seven years, there has been significant research and development into this concept.
And we have eventually developed a technical advanced hard carbon. And this is a replacement of existing graphite in the anode of batteries that have significant performance benefits. They enable a faster charging and discharging, higher cycling stabilities and perform better at low temperatures. And they can be mixed or they can be used as a loan. With this so, Stefan, can you tell me a little bit of why?
Why Yes, does it do of course.
So if we look into the mechanisms on how energy is stored and the lithium are stored, it basically all depends on the structure. The next slide will actually show you this in a simplified illustration. And on the left side, you see the graphitic carbons, which consists of these very parallel layers. That's the very definition of a graphite. And the lithium migrate from the sides into the layers and sit in between those stacks.
The process of intercalation is basically the secret of why we can store energy, particularly in these graphite carbons. These have shortcomings. Laurie has named them in the introduction here that the migration in and out goes via two sides, left and right, basically. And the intercalation also has its challenges at low temperatures. Our lignin based hard carbon, which is resembling hard carbons that the industry has known for years and years, just not bio based on lignin, has a different structure.
So the graphite layers are different, the crystalline structure is different, which will lead to different performance. And incidentally, it brings a lot of this faster movements of and a higher degree of freedom to move in low temperatures. That translates into the fact that our materials will allow a battery to charge faster and also to discharge faster, so you have more power in a short while that you need out of the battery without any problems. So the limitations are smaller. And as everybody that has looked into driving an electrical vehicle here in The Nordics may know, in the winter, electrical vehicles have a smaller range.
And particularly when you start up, the ranges and the battery will actually be deployed quite much faster. Our materials bring a solution to actually improve that performance. And that's where we see the major attack angle for us into this market entry point. If we go to the next slide, we see a short run up of the secrets of why this material shall and will have a place in the market. And as a matter of fact, it is existing in the market.
Cell makers that we are communicating with know this material. They know how to use it, and they know and appreciate a lot of these beneficial properties. Looking at this chart, which in itself can take very long to go into every detail, runs up again the fast charge and fast discharge capabilities, often referred to as so called C rates. Then you see the low temperature performance where we bring benefits. The electrolyte versatility, so basically the choice of the electrolyte that hosts and that carries the ions back and forth inside the battery, is wider and allows then to build different chemistry compositions for our customers.
The cycling stability is therefore that means allowing more cycles with the same battery before it actually degrades. And then there are some other factors like cell voltage and the energy densities, both volumetric as far as the gravimetric, where we do have challenges. Our material is not as dense. It is more open. It allows more movement.
But with this comes, of course, some downsides, which we don't want to hide, and it's very well described in literature, and the cell makers know this. And here, we see that even for applications where the energy density is a key factor, like the battery in a car, you can mix the material of a regular, a standard graphite, with our material, and you get benefits from both sides. So you're adding one plus one, and you're getting more than two. So this is where we really see a great potential going forward. So where is all this happening?
If we look at the next slide, we see a well known picture of our Sunnila mill in Southern Finland near Kopka, which is one of our pulp mills in the division, where the store Enso has invested in building a commercial lignin extraction unit many years ago. And we are currently and we have announced that in the Q2 results publications that the pilot production for lignin is going online there. And we call it a pilot operation because the amounts we can produce there are good for R and D and customer sampling. However, what we want to stress here, it is basically a miniature factory. So we will be producing the Lignode, and we are producing samples in the very same set that we are currently projecting to be used in a commercial setup.
It is serving as the blueprint for the next commercial plant to be taken up to be supplied with the commercial lignin extraction volumes. So our pilot plant in Sunila will bring us into the ability to build more batteries, to test more, to develop the product with the customers and make us actionable in creating that market opportunity. So Lauri, I think this is a good point to sum up.
Very good.
We need two more slides.
Thank you. We move into the summary slides and take a look at the what we have here. So in summary so on the next slide, we have really a sustainable, competitive and scalable opportunity here. And I'd like to recap some of the things that you just heard. So sustainable.
We have an active anode material into a battery value chain that is based on lignin. And lignin is a renewable biorefinery product from trees, so providing a very sustainable starting point. In fact, our target is to create the most sustainable and lowest impact anode material available in the market in this value chain. And in fact, we're using, effectively, the tree. So taking something that has been there and adding value to it and putting it into value chain that needs these benefits.
And what we bring in the value chain is a superior traceable raw material that has a very good sustainable footprint.
Stefan, it's also competitive. Yes. The next slide, please. It's not only sustainable, but it is bringing advantages that the market wants to have and is asking for. Our hard carbon can replace the graphite fully or it can replace the graphite partially.
And our customers are then able to dial in exactly the properties that they wish for their systems. And it could be that they are looking for the fast charge rates. It could be that they are looking for the cycling stability. It could be that they're looking for the low temperature performance that they want to offer the customers at the end application that want to use this. Our material comes with tunable properties as far as that goes and is, hence, a very competitive solution in combination or in replacement of the fossil based materials.
Good. And in the next slide, it's mostly highly scalable. So there is a lot of Ling Lin in our existing partner systems. It can be extracted. And, in fact, in Soungou we are already extracting that significant.
And we've already invested into pilot plant that is taking us in the pathway to a scalable process. In fact, this can be scaled to a lot more because there's quite a bit of lignin, and we're faced with the market that is growing significantly with demanding millions of tonnes of anode materials eventually in the next ten years. And on top of that, it is addressing the needs of a very important future supply chain and already happening today in Europe where we want to drive self sufficiency in battery supply. And anode and hard carbon based Ling node will be part of that solution. So how do we do this?
And how do we move forward? So in the next slide, partnering is a key. And partner is key to get speed, and partner is key to become a credible player. We're currently looking at the value chain and looking at the value chain players that can actually come and help us to speed up. And we're looking at active other active material players, cell, gigafactory players and OEMs to see what potential partnership we could create in this and inviting other players to help us to speed up.
Speeding up is an important two dimensions to get market acceptance and speed up the qualification processes and also the technology scale up of the manufacturing processes. And with this, in the next slide, with smart partnering, it's we believe strongly that it's enabling a faster scale up to reach towards our ambition. And the ambition is to, with the partnerships together, to create potentially five anode mills in the next five years, corresponding in the range of 80 to 100 kilotons of anode production, which will correspond to roughly 50% of the market share in Europe and has potential ambition of €1,000,000,000 of sales and a very healthy EBITDA margin projected. And estimated investment at this stage is in the range of 500,000,000.0 Need to stress that these are current estimates. And based on assumptions today, we're moving in this journey forward.
We're operating a pilot plan. We're working with the customers. We're learning day by day at very rapid speed. And with partnerships, we will speed that learning up a lot. In the picture, you see our Nordic mills that are initial existing base that serves as a basis for the initial locations, and that's a big picture of all the mills that we have.
Mills outside the store, and so base are, of course, also viable candidates in the future for supplies. So what's the pathway to this ambition? In the next slide. So how do we do this? So single production unit timelines from design to production traditionally is four years.
We feel that, with partnerships, we can speed this up quite a bit. In fact, the design work has started in early twenty twenty one, and we're that way. And with smart partnering, right partners, we feel that we can significantly look at shortening those time lines. Then qualification processes with battery manufacturers and OEMs can take up to three years or even more. And partnering again here plays a very, very viable role in shortening those timelines and getting through the qualification process.
So our current plan includes concurrent construction of several production sites in a partnership setting with the different value chain partners. And the scale up is built in the standardized 20 kiloton anode material units. And with timeline, we're looking at building one to two plants every year after piloting phase, which is estimated to take one to two years. With this, I want to thank you for participating in this teaching, and I will hand it back to Ulla.
Thank you, Lauri, Markus and Stefan. And we have here a good a bit number of questions. So why don't we start from the last ones? Because they were asked when all the presentation was done, which might be more relevant than the first ones. So the the first is who is the main competitor for this technology given you mentioned 50% market share in your presentation?
So first of all, the 15% market share, so that is market share from the total anode market. So there's different anode manufacturers that are producing anodes, so synthetic and natural graphite manufacturers. And that's the that's the competition.
Okay. Good. Thank you. Do you have ongoing qualification processing with battery manufacturers now?
Maybe I can comment that. So from the early days of this project, we've been interacting with big, renowned cell making companies as we are stopping basically with our area when the active material is created. But the actual validation, testing and the feedback on how these materials run, we've since basically 2018, 'nineteen, have been creating with entities in the market that actually manufacture the cells and test the cells. And today, we are in touch with a number of big players around the globe. But at this time, of course, we are not revealing or we cannot talk about which partnership or which company we're really working with in detail.
But, yes, we are working with the relevant players in the market. Yeah.
And maybe build on that, Stefan, is the pilot plant that we've in operation now, it's a key part of this collaboration with the customer base, and they're anxiously waiting for our samples from that scale. Very true.
Okay. Thanks, Stefan and Laurie. So next one, would you start constructing the plans on your own without partners?
I didn't Sorry. Could you repeat the question?
Would you be would you start constructing the plans on your own without partners?
I can I can take that? I mean, as we have communicated and and and you should heard from the presentation, we we see a huge opportunity in partnering up. Given the interest that we see around us, we will explore this partner partnering avenue fully for the near coming time. In case we have to then change direction, that that kind of decision would be taken later. But for the time being, we believe that partnering is key to scale this up fast.
Okay. Thanks, Juanpus. Next one, what could be the optimal mix of Glynote and Graphite?
I'll be happy to take that. So that question really can only be answered by the cell maker and by the OEM that wants to use that product. So there are currently concepts that are ranging between fifty-fifty to levels that actually can go as low as 10% addition of Lignode. We also see concepts where they want to go for 100% Lignode replacement. So it really is case dependent, and it actually drills down to levels of what type of car, what size of car, is it a last mile delivery vehicle or is it a passenger car that is driven in a completely different manner.
So that could be ranging in the combination concept and the mixing between 10% additional level of up to 50%.
K. Thanks. And next one to Markus. How large per share of the partnership economics would you anticipate for STURA?
Well, I think in a good true partnership, you you work with very like minded partners that have equal interest in the consortium or the setup that you are developing. So you could easily think that if we would be three partners, we would share pie in three pieces. However, at the end, this is always subject to what is each partner really contributing with. So if the contributors are on the scale where we find ourself, I e, contributors, of course, then we are ready to share the cake in equal pieces. If you are partners that that that bring in something less, of course, then then it's a bit different story.
From the experiences that we have from other other partnerships, we we have learned that that there is also a roof, especially at the early stages of scale up. So so I I would say that partnering with two, three like minded, not more than four is a is ideal setup.
Good. Thanks. Do you have any initial partners already, or will this require the pilot phase to take place first?
I can take that. Yep. So I'll leave that open. It's it's I can't talk about the initial thinking that we have that I'm going to reveal, but we have things going moving towards that. Answering question is pilot and piloting phase needed to do before partnerships are created, that's also to be seen.
And it's dependent on the dialogues that we will have. So I'll leave that on and open, and don't make a judgment on that yet.
Okay. Good. Thanks. The next one is then, is the guided 50% EBITDA margin now? I think you have mentioned 35 EBIT margin earlier.
So how do these two EBITDA and EBIT margins link to each other?
I I think it's very important to understand, the the the role of these two measures. And, EBITDA is is key for for for for in anybody entering a a new market, especially where you come in with something that substitutes something existing. And and we have now a track record in our innovation community to incorporate the logic of understanding and really simulating with tools the assumed future production cost from a very early stage of the innovation journey. And that is really a benefit. You have to understand what is the share of the cost of the raw material that you have to be processing, what are the share of the cost of the axillary that you need.
And in most of these new type of businesses that we look into, especially when we talk about carbon related products, what is the cost of electricity and what is the type of electricity that you are using to process this. And this is all then focusing on understanding your cost competitiveness against existing materials. If you look at the other lever and and and think about this from a EBIT perspective, in a fast scale up business, I find EBITDA much more relevant than EBIT. We we can always steer at the end
I think you have sort of been touching up on this, but maybe you can sort of clarify this even further.
Well, with all simplicity, I think that that that shareholding structure leading to a joint venture where where where we have a couple of partners sharing the cake. I I think that is the way forward using the example of sharing the cake in three.
Good.
Thanks. For the moment for for the moment, we also quite a lot focusing on setting up one structure to commercialize this. Yes. They're all different.
Mhmm. Okay. The next two questions are relatively related, so I read them one after another. So what are the benefits of renewable hard carbon compared to silicon based anodes? So the exosilicon is also proposed as an anode material.
How would lean node fit in in here?
We all look at the experts.
I will I will gladly take that. And it really depends on how much time we have to go into the details now. Yes. It is certainly true. Silicon no.
Silicon is one material that can also host the the lithium ions, and it is going in into anodes today. Large carmakers of electric vehicles are using batteries that have a certain additional level of silicon today, which then, let's say, it's a replacement of the graphite in order to boost the capacities and to change the properties of the entire cell. And that's a trend that we also would expect to continue. We don't claim that this we understand it will turn around the entire market. The energy storage market exploding will also lead, in our perception and what we hear from the market in a diversification of concepts.
And we see this all over the place in the discussions with the customers but also in media. Now coming back to the silicon and how does that work together with Lignode. Currently, we have indications and our basis and our hypothesis of going forward is that it works just as fine as graphite with the silicon. So, if you look at lower addition levels, that would be a concept. And then if you go into silicon heavy concepts that will be dominant or completely silicon, of course, they are replacing also the graphite completely.
Then the lignode would be either only a minor component or may not even be needed. However, when we look at the forecast for the next ten, fifteen years, we are pretty confident that the carbon dominated, and that means graphite, and lignode in the future will be a very large share in the energy storage market. And there is a place for more than one, two, three solutions in the future going forward.
Thank you, Stefan. Very interesting answer. Good. I'm ready for the next one. So, I think it is.
You told that you aim to gain credibility in the battery raw material market. What do you mean by becoming credible? What does it take?
Good. That's a very good question. It takes many things, actually. And and and setting up a new business is always going in the value chain that you have not participated before. So it gets some credibility related to product performance, securing supply and making sure that you're serving your customers as are needed.
So the basic aspects of business. And I think partnering will bring dimensions into that equation that we can speed up and not build everything ourselves. So combination of many things.
Thanks. Can you quantify the charging speed benefits?
That's a that's a really good question. And I cannot say a straightforward value that that would satisfy, you know, by a number. It really depends on the entire setup and design of the battery cell. It consists of so many components and balancing acts of different ways of building that cell. So that would have a much, much larger influence than the performance of a material that would replace one thing.
What we are, of course, going for is relevant changes. So if it is only cutting your charging time by 10% or anything like that, then it may be not satisfactory. But at the end of the day, that value parameter, that performance parameter would have to be discussed with the cell makers. What we do know is that they want to have lead node type materials and lead node for exactly that application.
Okay. Thank you, Stefan. So the next one is that what are the production costs for renewable hard carbon anode and graphite and silicon? Envision margins are much higher than current anode margins.
That is something that we are not in a position of of disclosing right now, of course. And as I said, this is a this is a tool and a process that we are working on, and and and one one one day, it will will also be no reality.
And if I may add one thought, which I think is very important to say, is that Doran so has been a pioneer in commercial extraction of lignin, and raw materials are a great part of that cost structure. And while we are not ready to discuss the cost structure or the fluctuations in the competitors' products, we see that we have our costs fairly good under control because it is lignin that we are extracting. That's the integrated part. And I think adding to what Markus said, while, of course, this is something that's unfolding, we are quite confident in being competitive here.
Good. Thanks, Stefan. How much does the carbon footprint of a regular car go down with this solution?
I can take that just to change.
Yes, please.
Yeah. It's one of those things. It depends on the system quite a bit, depends on the replacement rates and so forth and its ranges in those. And at this moment, it's it's such a specific benefit of the cell manufacturer and the OEM that we don't want to disclose those right now and the extent. But 50% of the 50% of the carbon footprint in the car is in the battery, and raw materials are a significant part of that carbon footprint.
Then the next question is a bit of a detailed one, so be careful listening in. So just to clarify, is the opportunity of 1,000,000,000 of future store ends of sales with the 50% EBITDA margin? So an incremental half a billion EBITDA opportunity, Or is it the total opportunity for the partnership split two, three ways, implying incremental EBITDA to Stora Enso of 200,000,000 to €250,000,000
Thank you. The opportunity that we envision here and the opportunity that we calculate on is the total opportunity, which is then to be shared with the partners that are participating in this opportunity. And and just to clarify one one one comment here, when the opportunity was presented, the opportunity then would be, in five years, 15% of the market, not not 50.
Okay. Thanks for the clarification.
But but of of course, we have to remember that that the world doesn't end in five years, and we can assume that the the speed of increase in the raw material need for the for the following five years is gonna be faster and bigger than this coming five years. That is very much supported also by legislation that we hear about in in in within Europe for the time being on the on the role of of electrified vehicles versus vehicles that would still run on combustion engines.
Good. Thanks. Then the next one is about the energy angle. Over time, do you intend to remove lignin from pulping process to the level of energy self sufficiency or potentially even more than that?
I could I could take that also. Thank you. This is also always a business case specific calculation. The role of lignin extraction and and and the fundamentals from the pulp mill perspective, they're gonna vary a lot. And and depending on the on the this becomes a little bit of a engineering stuff and explanation.
But depending on the dimensioning of the existing pulp mill, you can either extract lignin with a better or or a less good business case. Whenever we have limitations from a scale up in the energy block with the recovery boiler, Linging extraction is is a very positive contributor and very a very cheap way to also get more pulp out of the mill. Whereas in other cases, it can be the other way around, that there is there is capacity in the boiler part and and and the the debottlenecking should happen on the digester or or or wood handling part. So there there is no one answer. As we, in our division, we actually run quite a number of different lignin applications.
And this might also then lead the whole discussion to another direction. The more applications we will see in the future that are building on lignin, we do bio binders with neolignin. We are quite far in our carbon fiber, and and then we have lignode. And the more applications we see around us based on lignin as a raw material, eventually, one day are gonna lead to that's gonna be a commodity traded by itself on its own merits. And, of course, then the investment case, again, might look different.
So not not really one answer here. We, of course, strongly believe that lignin is gonna become a very important raw material contributing to to to the renewability story of of of of Stora Enso and and and give give us attractive new business in the future.
Good. Thanks for a very thorough answer. Markus, the next one, is the three year of qualification after production start, I e, we can see it in the EVs storage applications by 2028, or can some part of the three year qualification process run simultaneously with the four year ramp up production? In which case, which would be the earliest possible year?
I I think our pilot plant serves a very important role here, and and and maybe Stefan explains a little bit more on how we're going to work going forward with that.
Sure, sure. Thank you, Markus. So the qualification of a material into a battery cell is done very thoroughly and rightfully so. When you see those new e cars having problems with the battery even or the smartphone stories that we've all maybe been affected by or at least heard it when we entered an airplane couple of years ago, then that is the that's the background to that. Now the qualification cycles of three to four years before actually commercial volumes of batteries would be going into the OEM product are overlaid with the construction of the factory.
And the pilot factory, the miniature factory that we have in operation in Sunilamal in near Kotka is going to be our stepstone to speeding that up. And we'll have the customers test the materials, design their systems, and then there will only be the final qualification phase will be coming from the actual facility that will then supply those cell factories. So the answer is no, it's not 2028, but we see this in very close timely vicinity to the commercialization of the first factory that we'll have online.
Okay. Then the next one is, has Lin node been tested by the indie producers already?
So as we've said earlier, that we've been interacting with cell manufacturers globally with our materials and with our concepts for years. That indicates the level of interaction. To this date or until a few weeks ago, our pilot factory was not operational yet. And in order to make batteries that actually can be tested by an EV OEM, we would need to be able to supply hundreds of kilograms and tons of materials for their test cells in order to have enough, just plainly enough materials to make cells. So in short, the answer is that there is no prototype car driving around with our Lignot yet.
But, of course, we are pushing and hoping for, you know, having that really close in the future.
Then maybe the next one would be that can the lignin be extracted from both softwood and hardwood?
Yep. Yes. It can. Then, I mean Good. Because of the of the chemistry of wood, there will always be some small differences depending on what kind of linguine we actually really extract.
But there is a there is a lot of opportunity on on on, for example, Yukon based linguine as well. And and as you know, in in some places, you also have, setups where, in the same systems in the energy part, in The Nordics, we are mixing birch and and and and and softwood species, which means that you would get a mixed, type of lignin. And also that is a a potential solution going forward.
Good. Thanks, Markus. Could you please elaborate about your thinking around price benchmarks? Would natural or synthetic graphite be a relevant proxy?
I'll take that. So we work on targets. We work on targets that learn from the markets, and we look at the benefits that we can bring to the value chain. We are looking at being competitive in pricing as well as cost with synthetic, and we believe that the performance benefits that we can bring are on par there. So synthetic graphite is it works a lot as a benchmark for us.
Good. Thanks. Could you describe the production process? What do you what do you do with the lean in? Could you describe the production construct, and what are the main cost elements?
And shall I
take that?
Yes, please.
Okay. So, of course, we let me rephrase this. So turning any biomass into a carbon material is something that has been known for decades, centuries, maybe even millennia, if you want to look at charcoal, etcetera, etcetera. The basics are that you need to take that lignin, which we know as a powder material, and then you carbonize this into a carbon material of very high elementary carbon content that is a thermal treatment. And then you need to have the right particle size distribution of very few microns, and also that depends on the wishes from the customers and the requirements and also their testing schemes of saying which works best in their setup.
And so we have been able to create a process that consists of multiple steps of thermal conversion and mechanical treatments, milling and upgrading the materials to the final step. And I think we have created quite a bit of know how inside the company that also will allow us to deal with what Markus was just saying that in some other mills, unlike Sunila Mill, where we have only softwood lignin, we would be able to adopt our processing technology and steps to other lignin types. Because if we have learned one thing in the past years is that lignin is not lignin is not lignin is not lignin. So you have to really know your game, and Sorrento has built that position.
Good. Thanks. So the next one, are you counting on selling Lignode at a meaningful green premium to fossil graphite? Is it is this a part of your profitability expectations?
Well, it's a it's a combination of many. I would answer this is a value based pricing is a big component on this, and it's not the only dimension. There's many other dimensions like you saw in Stefan's part of the presentation. There's other benefits in this. And it will be a balance of all of those together.
There's not one single that's more important than the other.
Okay. Thanks, Lauri. What amount of extra credit limit will be required for your €1,000,000,000 sales assumption?
So, yes, I can take that. So we're looking at the target yields of somewhere to one to three in that range or more, and it will develop over time. So three times the amount of of target. So 250 to 300,000 tonnes of lignin demand in this this range at this stage.
Good. Thanks. And then another one. What additional lean in extraction CapEx will be needed to supply you hard carbon production?
Well, the range that we gave would correspond to a range of everything that would be in in in that package, including the LinkedIn thinking.
Okay. And then what percentage of your total LinkedIn production capacity will be have to be used for the 1,000,000,000 sales opportunity?
So that's one of these. Like I said, there's a lot of linguine. There's an optimal way of taking the linguine out. There is a potential supply that's relatively high. This is based on the estimations that we we feel comfortable of extracting out of systems without of of still optimizing the system further when we take it out.
So that's how this is is thought over within our our mill mill setups.
To to fill in here, still from a from a scale up and and a total business case perspective, one should never exclude our peer mills in in other companies, that could be equally in interested in in in providing lean in in a in a new value chain. So I I don't think that, from a holistic business case perspective, I don't think we can limit ourselves to the LinkedIn that we have in store handsome if if we go ten to fifteen years into the future.
Good. Good. Thanks.
We are
We we have to have at hand so much in our own hands that we really feel comfortable in scaling up to reach this meaningful position that was discussed earlier. Because if if you if you try to enter a big market, and and a fast developing market as a very small marginal player, we don't believe it's gonna work. So so, again, you have to see it in two two two ways. One is there should not be limitations in ultimate scale up. On the other hand, when you go out and really start to do it, you have to know what you have in your own hands and what you can really supply and commit to.
Good. Thank you, Markus. And we need to enter those words because we are running out of time here. So I want to thank you, everyone, for participating this Tilinno teaching. It was a great attendance, and I hope you were able to get answers to your your questions that we have been getting since our q two result announcement.
So thank you for participating, and, also, thank you for the biomaterials team for your contribution, and goodbye to all.
Thank you. Thank you. Bye bye.