Tesla offers “giant contract” to responsible nickel miners
Tesla (NASDAQ: TSLA) boss Elon Musk is calling miners to
produce more nickel, a key ingredient in the batteries that power his company’s
electric cars, and has offered a “giant contract for a long period of time” to
any firm able to extracted it in an efficient, environmentally sustainable
manner.
Musk noted on a second-quarter earnings call that the high
price of electric car batteries continues to be one of the main hurdles for
Tesla.
“The real limitation on Tesla growth is cell production at
an affordable price. That’s the real limit,” he said, adding the company would
expand its business with battery-partners Japan’s Panasonic Corp., China’s CATL
and “possibly with others.”
The electric vehicles (EVs) maker’s primary battery
technology is based on a blend of nickel, cobalt and aluminum (NCA). However,
as it shifts away from using cobalt over ethical mining and cost concerns,
Tesla is placing a greater emphasis on the need for a steady supply of nickel.
A reportedly signed deal between the Tesla and Glencore
(LON: GLEN) in June has cast doubts on the company’s statement that it’s close
to eliminating cobalt from its batteries altogether.
The contract would involve supplies of 6,000 tonnes of
cobalt from the Democratic Republic of Congo for Tesla’s new Shanghai
factory.
Nickel advantage
Using nickel in battery cells helps to make them
energy-dense. This means that those batteries can be smaller, lighter and can
make cars run further on a single charge.
Musk’s call for greater nickel mining comes as prices for
battery materials, particularly the silvery-white metal, have hit historic lows
in recent months.
Nickel dropped to a 14-month low of $10,865 a tonne CMNI3 in
March, recovering since to $13,180. That’s still around 30% less than the
prices reached in September, when nickel traded at five-year peaks.
“[Musk] needs nickel, so he hopes nickel prices will go
lower and lower,” a Chinese nickel trader told Reuters. “Prices will not be
impacted in the short-term because the market is in surplus.”
Supplies of battery-grade nickel, however, could run short
as early as 2023, according to Bloomberg’s market research division. BNEF
expects a tight balance in the next two to three years as lithium-ion battery
demand picks up.
Tesla is expected to make announcements on its battery tech
developments in September at its “Battery Day” event.
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