For Tesla and its chief competitors in the race for global domination of
electric vehicle sales, it ain’t all about lithium ion.
There are other valuable metals needed to make the battery packs do what’s
asked of them, with nickel being essential. Tesla and its battery producer
partners, and other automakers and their suppliers, are worried about the
longer-term supply of nickel according to a
new study by BloombergNEF.
The study predicts that EV makers will be driving demand for nickel
about 16 times to 1.8 million tons in the next years.
Class-one nickel, a high-purity material used in batteries, is expected to
see demand greatly outstrip supply in the next few years. That will be fueled
by meeting the large Chinese EV market, and other global markets where demand
is expected to grow.
That need for class-one nickel will outstrip supply within five years,
according to the study.
One problem has been a lack of real investment in new mines for materials
including nickel, Tesla’s global supply manager of battery metals, Sarah
Maryssael, said at a Washington meeting in May. That could drive up prices as
battery demand increases greatly.
Tesla CEO Elon Musk is concerned about having enough economically viable —
and available — metal to continue meeting its growing electric car demand.
That will take off even more as the company taps into China’s booming
markets.
“They are getting ready to have the new factory in China, and are at full
capacity in North America,’’ Peter Bradford, chief executive officer of
nickel producer Independence Group NL, said. “They recognize the biggest risk
from a strategic supply point of view is nickel.’’
Bradford last week met with one of Tesla’s battery metals supply chain
team. His company, Perth-based Independence, last year increased nickel
output from its Nova mine in Western Australia. Independence will be spending
as much as A$75 million ($51 million) on exploration in an effort to extend
the asset’s life and find new deposits. Related:
Investor Sentiment Unfazed By Facebook's $5 Billion Fine
Bradford’s industry had been focused mainly on supplying the metal to
stainless steel. By 2030, the BloombergNEF study expects that batteries will
account for more than half of demand for the valuable class-one nickel.
Metal suppliers have been scrambling to find the right metal to fill that
demand. Australian firm BHP, the biggest maker, is betting
on bright-turquoise colored nickel sulphate. That will be taking place at
its nickel refinery south of Perth, with plans to potentially carry out the
industry’s largest expansion.
The mining company had been seeking a buyer for its Nickel West facility,
but reversed course recently after reviewing growth forecasts in lithium-ion
batteries and a scarcity of high-quality nickel supply.
The challenge will be there to mass produce more affordable EVs and meet
consumer demand in China and other key markets; battery costs have been the
biggest stumbling block to reaching that sales volume. Increasing government
mandates to bring in more EVs is part of the forecast, with incentives being
offered and alliances being forged to increase public charging stations.
Tesla is seeing car buyers impatiently waiting for delivery of their Model
3 electric cars. The company is betting that its upcoming Model Y will be in
strong demand, and is already preparing to have production capacity in place
more in line with the popular Model 3.
The Model 3 looks like a smaller version of the Model S, and the Model Y
will be available to car shoppers interested in the crossover SUV
functionally of the Model X, but also want to have a more affordable and
smaller alternative. Musk is also promising that the Model Y will have 300
miles of range, which would address a critical concern for buyers ready to
leave their gasoline-powered cars behind for the first time ever. Related:
Tesla Stock Crashes On Poor Earnings Report
A new
Wood Mackenzie study sees the metals problem much broader, with
lithium, cobalt, and nickel supplies to be worst hit over the next few years.
Supply for the three metals is fine for now, said Gavin Montgomery,
research director at Wood Mackenzie. Short-term market prices have fallen,
and that will deter producers from increasing supply to meet future demand,
he said.
But long-term that will change. Demand is expected to grow so rapidly with
car makers taking on their ambitious goals to mass produce EVs, that metal
suppliers won’t be able to keep up, Montgomery said.
Automakers and their battery partners need to start planning for it now.
“Getting the quantity of nickel that (electric vehicles) will need by the
mid-2020s will be a challenge ... with lead times often up to 10 years,
investment needs to happen now,” Montgomery said.
By Jon LeSage for Oilprice.com
