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The merry-go-round of private meetings at an annual mining industry conference at Florida’s Hollywood Beach had a cast of new faces this year: auto sector executives increasingly anxious about surging prices and tighter supply of metals used in electric vehicle batteries.
Tesla Inc., Ford Motor Co. and Mercedes-Benz Group AG were among automakers which sent senior staff to mingle with about 1,500 delegates at the BMO Global Metals & Mining Conference, an event normally attended mainly by iron ore and aluminum producers. Their presence underscores the growing popularity of battery-powered cars, helped by a global push toward clean energy, which is estimated to require $10 trillion worth of metals through 2050, according to BloombergNEF.
Car producers “had room-to-room meetings with a lot of companies, like ourselves, trying to understand how to address their own supply chain,” said Trent Mell, an attendee and chief executive officer of Electra Battery Materials Corp., a Toronto-based developer of mining and refining projects. Auto companies have recently expanded their teams and are now filling rooms with specialists in metals like lithium — the metal that’s ubiquitous in electric car batteries — and manganese, or in battery recycling, he said. “Once you might have had one or two people dealing with raw materials procurement.”
Availability and costs of crucial battery materials like lithium, cobalt and nickel have been key concerns for years among EV makers trying to build out their electric lineups. The issue has gained more urgency in recent months due to rising competition to strike supply pacts with miners and project developers and by wild swings in raw material costs. The spot value of lithium consumption alone surged to about $35 billion in 2022, from $3 billion in 2020, according to Bloomberg calculations.
Lithium “was a meaningful source of cost increase,” for Tesla in the final quarter of 2022, CFO Zachary Kirkhorn said in January. While a key lithium benchmark has tumbled almost a third this year, prices remain 590% higher than at the start of 2021.
Volvo Car AB, Nio Inc. and Jeep-maker Stellantis NV have also said they’re being affected by the impact of higher raw material prices, and some are looking for new deals with suppliers to tie-up potential sources of metals. Like others, EV maker Rivian Automotive Inc. is spending a lot of time examining potential new deal structures with suppliers, and this “could involve ownership positions” in mining assets, CEO RJ Scaringe said on a Feb. 28 earnings call.
General Motors Co. last year struck a prepayment deal for lithium, while Ford Motor Co. offered a loan to help fund a mine project.
“Investing in these raw materials provides a way for automakers to control margins along the supply chain and ensure they remain competitive,” said Andrew Miller, chief operating officer at Benchmark Mineral Intelligence, an industry data provider. “Raw materials are now the largest cost driver for a battery.”
Automakers are also getting involved in the development of new mining projects.
GM added a $650 million stake in Lithium Americas Corp. to help deliver a mine in Nevada, and has considered buying an interest in Brazilian giant Vale SA’s base metals unit. Tesla, which is constructing a metal refinery in Corpus Cristi, Texas, has studied a takeover of miner Sigma Lithium Corp. The world’s No. 2 miner Rio Tinto Group is hunting for lithium deals, but expects to be outbid by car producers, CEO Jakob Stausholm said last month.
Car manufacturers are also putting more senior managers, rather than junior procurement executives, in charge of discussions over metals, according to Kent Masters, CEO of Charlotte, North Carolina-based Albemarle Corp., one of the world’s top lithium suppliers.
“It’s obviously become a more critical issue for OEMs,” Masters told the Florida conference, organized by Bank of Montreal. “We’ve been able to change the level at which we interact with those customers, and they’re investing significant amounts of money in electric vehicles.”
Read more: Tesla lobbying to secure lithium from Chile — report
Volkswagen AG has pledged to boost cooperation with Canada’s mining sector, formed a joint venture with Belgium-based materials supplier Umicore SA and has a deal with would-be lithium supplier Vulcan Energy Resources Ltd. which aims to develop an operation in Germany.
VW is “sounding out the market” and is in talks with “many potential partners” on strategic raw materials, according to a spokesperson. “Various instruments are possible, from long-term agreements to streaming deals and equity investments,” the person said. Hedging of commodities prices is likely an important tool to cope with rising raw material costs, according to the group’s CFO Arno Antlitz.
About $265.5 billion has been invested in developing EVs since 2018 but only $40 billion on raw materials, according to Battery Materials Review, which tracks investment in the sector.
Even so, some said moves by car manufacturers to buy directly into metals could be doomed by their lack of expertise in mining and dismal record on acquisitions, according to Jeff Currie, Goldman Sachs Group Inc.’s head of commodities.
“It always ends in tears,” he told Bloomberg Radio. “It requires an expertise that is very different than producing cars.”
(By Danny Lee, David Stringer and Jacob Lorinc, with assistance from Yvonne Yue Li, Monica Raymunt, Annie Lee, Mark Burton and Keith Naughton)
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2 Comments
W
HONESTLY, ..ALL, of these ‘Western’ Auto manufacturing OEMs are just about the dumbest bunch of drongos on this Planet..! ? WAKE, ..UP…!! The ONLY, way they are going to secure reliable, and ..guaranteed, supply of these EV Critical Minerals, ..for ..themselves, is by either entering into JVs, with the existing PRODUCERS, of these minerals, PARTICULARLY, Lithium PRODUCERS, ..OR, by them, BUYING OWNERSHIP, OUTRIGHT, of those same, CURRENT, EV Critical Minerals PRODUCERS…!! ??. THAT’s ..IT…!! ?. NOTHING, more complicated, than just THAT..!!! ??
R Brown
I entirely agree. Google Ford-Nuttallburg WV