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July 23, 2020

Tesla CEO asks miners to produce more nickel

Tesla CEO Elon Musk has urged miners to produce more nickel, a key ingredient for EV batteries, and warned the current cost of batteries remained a big hurdle to his company's growth.

By Olly Wehring

Tesla CEO Elon Musk has urged miners to produce more nickel, a key ingredient for EV batteries, and warned the current cost of batteries remained a big hurdle to his company's growth.

"Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way," Musk said on a post-earnings call, according to Reuters.

The report noted nickel makes batteries energy dense so cars can run further on a single charge while Tesla needs the metal more than ever as it looks to boost production of trucks and solar projects that use a lot of nickel.

Musk's call for greater nickel mining came even as prices for battery materials wallow around rock bottom, Reuters said.

However, traders and analysts told the news agency the volume Tesla would need was unlikely to make a compelling business case for miners to invest in increased production, nor were they likely to boost prices in the medium term.

Tesla currently sources nickel cobalt manganese (NCM) batteries from LG Chem and nickel-cobalt-aluminium (NCA) batteries from Panasonic.

These companies indirectly buy nickel from mining companies in a long auto supply chain, according to Reuters, adding Tesla doesn't disclose nickel miners in its supply chain.

Given Tesla's focus on sustainability, the company is likely to prefer to buy from miners of higher grade nickel sulphide which requires less power to process than laterite ore, Lachlan Shaw of National Australia Bank, told the news agency.

Brazil's Vale, which operates in Canada using some hydropower, Russia's Norilsk Nickel and BHP Group operations in Western Australia are the three key suppliers.

"Vale is in the box seat," Shaw added.

EVs are expected to be the quickest growth market for nickel miners, Reuters said.

Nickel consumption in EV battery materials is expected to soar 64% between 2019 and 2025, research firm Wood Mackensie told the news agency, although it added that satisfying this demand could be challenging for an industry that has been slow to add capacity in a timely and cost effective manner.

"He needs nickel so he hopes nickel prices will go lower and lower," a China based trader told Reuters.

"Prices will not be impacted in the short term because the market is in surplus."

Nickel hit a 14-month low of US$10,865 a tonne in March but has since recovered to $13,180, still down by some 30% from five year peaks seen in September. Prices rallied 2.6% partly on Tesla's bullish outlook, a trader told Reuters.

"The real limitation on Tesla growth is cell production at affordable price. That's the real limit," Musk reportedly said, adding the company would expand its business with Panasonic and CATL and "possibly with others".

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