Battery & Fuel Cell. US Industry Study with Forecasts to 2007 & The First Choice In Industry Research. The Freedonia Group

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1 Battery & Fuel Cell Materials US Industry Study with Forecasts to 2007 & 2012 STUDY #1722 October 2003 $3800 The Freedonia Group The First Choice In Industry Research 767 Beta Drive Cleveland, OH USA Tel: (US) or Fax:

2 Battery & Fuel Cell Materials US Industry Study with Forecasts to 2007 & 2012 Study #1722 October 2003 $ Pages Stronger increases will be registered in the battery market by materials used in separators, electrolytes and other functions such as catalysts and performance additives US demand to grow over 6% per year through 2007 Battery and fuel cell materials demand is projected to increase 6.2 percent annually through 2007 to $3 billion. Rising demand from end users and product designers for more powerful, longer lasting batteries will result in increased use of better performing, high-purity materials. In addition, the growing popularity of high-drain electronic products like digital cameras and 3G (third-generation) wireless phones will lead to an acceleration in US battery production, spurring materials demand. Fuel cell output will climb tenfold, resulting in stellar gains in associated materials consumption. Carbon/graphite, polymers to rise fastest Carbon/graphite and polymers will record some of the strongest increases through 2007, benefitting from their use in rechargeable lithium and other advanced batteries, and in fuel cells. Greater demand for proprietary formulations developed to meet the specific needs of producers will also help support dollar gains for these materials. Although commercial demand is currently negligible, the market for carbon nanotubes and other nanomaterials with the potential to dramatically improve battery and fuel cell performance will climb at a fast pace as well, spurred by ongoing advances in nanomaterial technology and fabrication techniques. Metals will continue to account for more than half of all battery and fuel US Battery & Fuel Cell Materials Demand by Type, 2007 ($3 billion) Metals 51% Chemials 26% Polymers 11% Carbon/Graphite 5% Other 7% cell materials consumption in 2007, with healthy sales conditions for smaller volume metals such as lithium, titanium and platinum (a critical component in many fuel cell designs) helping to stimulate overall metals demand. Market gains for chemicals, which account for the second largest share of total materials demand, will be fueled by rapid growth in production of lithium batteries, which are important markets for items like lithium salts, manganese dioxide and solvents. Electrodes remain top function Electrodes will remain by far the largest functional category for materials, benefitting from rising output of lithium and other sophisticated battery types, and fuel cell systems. However, stronger increases will be registered in the battery market by materials used in separators, electrolytes and other functions such as catalysts and performance additives. These items are the focus of intense research and development activity aimed at reducing manufacturing costs and improving product performance. All of the major types of materials used in the construction of fuel cells will record double-digit annual gains through 2007 as fuel cell output rises from a very small base. Visit for complete text and table of contents

3 Table of Contents Letter From the CEO INTRODUCTION EXECUTIVE SUMMARY... 1 MARKET ENVIRONMENT General... 4 Economic Environment... 5 Durable Goods Manufacturing Outlook.. 8 Battery Industry Overview... 9 Primary Batteries Secondary Batteries Fuel Cell Industry Overview Technology Trends Batteries Basic Technology Recent Developments Fuel Cells Basic Technology Fuel Cell Chemistries Battery & Fuel Cell Nanomaterials.. 28 Environmental & Regulatory Issues BATTERY & FUEL CELL MATERIALS OVERVIEW General Demand by Type Demand by Function Demand by Application BATTERY MATERIALS DEMAND General Demand by Type Metals Lead Zinc Steel Other Nickel Lithium All Other Chemicals Metallic Chemicals Manganese Lead Silver Nickel Lithium Zinc Other Other Chemicals Sulfuric Acid Solvents Surfactants Potassium Hydroxide All Other Polymers Polyolefins Fluoropolymers Other Carbon/Graphite Other Materials Silica Glass Fibers Ceramics Dear Colleague: As the world economy emerges from its recent period of doldrums, businesses are planning how to benefit from the new opportunities that an upswing will bring. In making those plans, strategic planners like you require credible industry information on which to base decisions. At Freedonia, it is our mission to provide you with an unbiased, reliable outlook for each industry that we study. We carefully examine available sources, separate the wheat from the chaff, and distill an ocean of data into a concise presentation of where an industry stands today... and where it is going. At Freedonia, it is our mission to provide you with an unbiased, reliable outlook for each industry... Each Freedonia industry study provides you with the information and analysis you need to make important decisions. How large is your target market? Which product segments are growing fastest? Which markets are growing fastest? Our analysts review the relevant secondary sources and talk directly to participants in the industry to find the answers. Batteries and fuel cells will fare well in the coming years in order to satisfy our ever increasing need to power more gadgets. And what's good for batteries and fuel cells is also good for battery and fuel cell materials. Learn which materials stand to gain the most. Our Battery & Fuel Cell Materials study represents the culmination of several hundred hours of Freedonia analysts' time; take advantage of our work at economical off-the-shelf prices. I invite you to put the Freedonia Group research team to work for you by acquiring our Battery & Fuel Cell Materials study today. Very truly yours, Jeffrey Weiss, CEO

4 Table of Contents (cont.) All Other Demand by Function Electrodes Containers Electrolytes Separators Other Performance Additives Gaskets & Seals Catalysts All Other Demand by Application Primary Batteries Alkaline Zinc Types Primary Lithium Other Primary Batteries Secondary Batteries Lead-Acid Rechargeable Lithium Nickel-Cadmium Other Secondary Batteries FUEL CELL MATERIALS DEMAND General Demand by Type Metals Platinum Other Polymers Carbon/Graphite Chemicals Other Materials Ceramics All Other Demand by Function Catalysts Plates Metals Other Electrodes Electrolytes Other Fuel Storage All Other Demand by Application Proton-Exchange Membrane Phosphoric Acid Alkaline Solid-Oxide Other Molten Carbonate Derivatives & Hybrids INDUSTRY STRUCTURE General Market Share Manufacturing Battery Materials Fuel Cell Materials Research & Product Development Marketing & Distribution Acquisitions & Divestitures Company Profiles US Battery & Fuel Cell Materials Demand by Application, 2007 ($3 billion) Secondary Batteries 62% Kerr-McGee Corporation Kerr-McGee Center Oklahoma City, OK Sales: $3.7 billion (2002) US Sales: $2.2 billion (2002) Employment: 4,470 (2002) Fuel Cells 8% Primary Batteries 30% COMPANY PROFILES Key Products: manganese dioxide, lithium manganese oxide and lithium-metal-polymer battery materials Kerr-McGee is an international energy and chemical company. The Company operates in two segments: Exploration and Production, and Chemicals. Kerr-McGee was the sixth biggest supplier of battery and fuel cell materials to the US market in 2002, with a 2.4 percent share of domestic demand. The Company is active in the US battery and fuel cell materials market through the Chemicals segment, which had sales of $1.2 billion. The segment operates through Kerr-McGee Chemical LLC (Oklahoma City, Oklahoma), a subsidiary of Kerr-McGee Corporation. Kerr-McGee Chemical offers several product lines, of which the electrolytic and specialty chemicals portfolio includes manganese dioxide and lithium manganese oxide for application in alkaline batteries. These products are manufactured at a facility

5 Freedonia Study # BATTERY & FUEL CELL MATERIALS Carbon/Graphite Demand in Fuel Cells (million dollars) Item Fuel Cell Shipments $ carbon/000$ shpts MARKETS The Markets Section analyzes trends and considers the threats and opportunities in each major market Fuel Cell Carbon/Graphite Demand % carbon Fuel Cell Materials Demand Demand by Application BATTERY & FUEL CELL MATERIALS OVERVIEW Suppliers of materials used in the manufacture of batteries and fuel cells will benefit from healthy increases in output of fuel cells, lithium batteries and other high performance batteries through For example, in January 2003 Energizer announced plans to boost lithium battery production capacity at its facility SAMPLE in Saint PAGE Albans, Vermont because of strong demand. Text sections In contrast, support the each outlook for materials used table s in alkaline, numbers lead-acid, & projections nickel-cadmium and zinc type primary batteries is less favorable, with the latter two markets continuing to decline as domestic output levels fall. Materials demand in these applications will be limited by such factors as downward cost pressures and competition from better-performing battery types. With demand for materials rising at a 4.9 percent annual rate, secondary batteries will remain by far the Battery largest Container Materials Demand single market in 2007, accounting for more than (million 60 percent dollars) of all materials demand. This is predominantly due to the huge size of the lead-acid battery materials Item market Although lead-acid battery materials demand is expected to accelerate, much faster market gains will be recorded Battery Shipments by rechargeable lithium and other secondary battery $ types, container/000$ shpts which include nickel-metal hydride (Ni-MH) batteries, widely used in a number of consumer, business and government Battery Container Materials Demand163 settings. Ni-MH batteries also appear to have moved into the lead as the chemistry of choice for hybrid/electric By Type: MATERIALS Metals 81 The 100Materials 115 Section Polymers & Other 82 provides demand 130 for 145 historical years and By Application: forecasts growth to 2007 Primary Batteries and Secondary Batteries % container Battery Materials Demand

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