Tesla and BHP negotiate nickel ink supply ahead of surge in demand

Tesla will insure nickel from raw materials production giant BHP, the automaker’s latest move to secure direct sources of raw materials that are expected to increase demand before the end of the decade.

BHP’s Nickel West division will supply an undisclosed quantity of the ore from its mines in Western Australia. The two companies also agreed to work together to increase the sustainability of the battery supply chain and identify ways to decrease carbon emissions from their respective operations using energy storage combined with renewable energy.

Nickel is a key mineral in lithium-ion batteries and a cornerstone of Tesla’s next-generation battery chemistry. While many lithium-ion batteries have cathodes made of nickel, manganese, and cobalt, Tesla is taking a different tack. On Tesla Battery Day 2020, Musk said the automaker would invest in a nickel-rich cobalt-free cathode for some models, citing higher energy density.

Tesla has also not been shy about its own intention to increase battery cell production in the next decade, aiming to produce 100 gigawatt hours of batteries by 2022, to a staggering 3 terawatt hours per year by 2030.

To that end, the company is moving quickly to secure purchase agreements with major nickel producers. Earlier this year, the automaker announced a partnership with a nickel producer in the French Pacific territory, New Caledonia. Just a few months later, Tesla Chairman Robyn Denhlm confirmed that the company was looking to buy around $ 1 billion per year in battery minerals from Australia alone.

Musk has repeatedly urged miners to produce more nickel. In an investment call last July, he told producers: “Tesla will award you a giant contract for a long period of time if you extract nickel efficiently and in an environmentally friendly way.” At Battery Day, he reiterated his position: “To scale, we really need to make sure that we are not constrained by full nickel availability,” he said. “I actually spoke to the CEOs of the world’s largest mining company and said, ‘Please make more nickel, it’s very important.’

But finding an environmentally friendly source of nickel is challenging. Some of that has to do with problems endemic to current recovery and smelting techniques; others are more directly manageable by mining companies. For example, nickel mining operations in Indonesia, the world’s largest producer of the metal, have been criticized for their reliance on coal and their waste disposal techniques.

BHP claims that its operation is one of the most sustainable in the world, and Tesla’s decision to partner with it could be seen as confirmation of that fact. The raw materials producer said in February that up to 50% of the electricity to power one of its nickel refineries would come from solar energy resources.

The vast majority of the world’s nickel supply is currently consumed in the steel industry. While the demand for nickel in the energy storage and electric vehicle sectors is currently relatively small, the demand for nickel International Energy Agency estimates that it will increase more than 4,000% in the next 20 years, from 81 metric tons in 2020 to 3,352 metric tons by 2040.

Nickel West has historically been a small fraction of BHP’s overall business, overshadowed by its iron ore, copper and oil businesses. The raw materials producer has tried to sell Nickel West several times since around 2015, but appears to have changed its mind with the anticipated surge in demand from the energy storage and electric vehicle sectors.

Industry Analysts Benchmark Minerals estimated the Tesla deal could be worth up to 18,000 tons of nickel a year.

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