Obsessed with nickel, Tesla signs a long-term contract with Vale

The American electric car giant is making great strides in securing its supplies. In its report on the impact of its activities published on Friday, Tesla confirmed that it had sealed a commercial agreement with Vale to supply nickel, essential for the manufacture of its electric batteries. The metal will be extracted from the Canadian mines of the Brazilian group, which have an annual production capacity of 75,000 tonnes.

“This agreement is in line with our strategy of exposure to the electric vehicle and low carbon footprint industry,” said the mining group. Vale claims a carbon footprint of 4.4 tons of CO2 for every ton of nickel coming to market, one of the lowest in the world.

50 kg nickel

Tesla boss Elon Musk has made an obsession with nickel, as the metal is crucial for making batteries alongside lithium and cobalt. The troublemaker of the automotive industry is preparing for a bottleneck in the years to come with the rise of electric cars and the explosion in demand.

Nickel requirements vary depending on battery chemistry and capacity, but according to calculations by French nickel producer Eramet, a battery contains an average of 50 kg of nickel, 7 kg of cobalt and 45 kg of lithium. According to the International Energy Agency, the transport and energy sector will consume 19 times more nickel in 2040 than today.

Volumes are not Elon Musk’s only obsession. It also focuses on the environmental conditions of production because the extraction of nickel produces astronomical quantities of waste. In the summer of 2020, Elon Musk had also urged the mining industry to accelerate nickel production while respecting ecosystems as much as possible. The Tesla boss is also careful not to depend solely on Chinese suppliers.

Series of contracts

It is in this context that Tesla has multiplied commercial agreements. The American manufacturer has agreed to buy part of the nickel produced in New Caledonia by Prony Resources, a consortium led by the commodity trader Trafigura. More recently, Tesla concluded an agreement with the giant BHP for Australian nickel or with Talon Metals which is developing a mining project in Minnesota.

Nickel is all the more important in the eyes of Elon Musk as it replaces part of the cobalt. The supply of this metal is very problematic because 60% of cobalt is extracted in the Democratic Republic of Congo in unworthy environmental and social conditions. Moreover, the cobalt value chain is also largely dominated by China.

Soaring nickel prices are another source of concern for automakers. The ton of metal costs more than 30,000 dollars, driven by the war in Ukraine. Russia is the world’s largest producer of nickel for batteries and investors fear sanctions will prevent Nornickel from supplying the world.

Soaring metal prices are driving up production costs to the point that some brands have had to increase the selling price of their vehicles. Since July, lithium has seen its price jump 400% to 63,500 dollars per ton, a “insane” level, denounced by Elon Musk.

To circumvent the problems of supply and production costs, car manufacturers are developing other battery chemistries. Tesla already incorporates cobalt- and nickel-free lithium-iron-phosphate (LFP) batteries in some of its vehicles.

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