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Elon Musk Urged To Produce More Nickel, Promising A Major Contract

Elon Musk Urged To Produce More Nickel, Promising A Major Contract

Tesla, the world's leading electric car manufacturer, is ready to award a major contract to Nickel producers committed to the concept of sustainable development, said Elon Musk, the company's Chief Executive.

"Tesla will give you a giant long-term contract if you produce Nickel efficiently and safely for the environment," Musk said, as quoted by Reuters, during a conference call on the results of the second quarter.

The current cost of battery components is an obstacle to Tesla's growth, Musk said.

Why Musk needs Nickel?

Nickel is an important component of EV batteries (battery and hybrid cars), which increases their capacity and allows the car to increase mileage without recharging. Tesla's demand for Nickel is driven by both the expansion of EV production and the development of a solar panel project that also uses this metal.

In addition to the main factory in California, Tesla is building a Gigafactory in Shanghai, preparing a site in Berlin and yesterday announced the creation of another plant – in Texas.

Tesla Inc. now consumes Nickel-cobalt-manganese batteries of the Korean company LG Chem and Nickel-cobalt-aluminum batteries of the Japanese Panasonic. These companies, through a long supply chain, consume Nickel produced by mining companies. Tesla does not disclose which companies are part of its supply chain.

Taking into account Tesla's desire for sustainable development, the company is likely to prefer to buy high-quality sulfide Nickel, which requires less energy to produce than Nickel from laterite ores, Reuters quotes the opinion of Lachlan Shaw from National Australia Bank.

Major suppliers of Nickel

The key Nickel suppliers are Vale, which produces Nickel in Canada and Brazil, Norilsk Nickel, the main producer of high-grade Nickel, and BHP Group, which operates in Australia.

A dam break at one of the Vale iron ore plants in January 2019 caused the largest environmental disaster in the industry, with human casualties.

The production of cathode materials for batteries has been one of the main drivers of Nickel's demand growth over the past few years.

Wood Mackenzie forecasts that Nickel consumption in electric vehicle battery materials will increase by 64% between 2019 and 2025. Meeting this demand can be a challenge for an industry that is slowly increasing cost-effective production.

NorNickel Forecast

Norilsk Nickel previously noted that it does not expect a long-term negative impact of low oil prices on the electric car industry, despite a sharp decline in the cost of ownership of gasoline cars. NorNickel is optimistic about the development of the EV industry in the long term, as multibillion-dollar investments in infrastructure have steadily reduced the average price of a battery pack to $100/kWh.

In 2018, Norilsk Nickel launched the first downstream project aimed at supplying the battery industry. Norilsk Nickel Harjavalta, the Finnish site of Norilsk Nickel Harjavalta, under an agreement with BASF, supplies Nickel and cobalt raw materials for the production of battery materials at a plant being built next to Harjavalta. BASF is investing about 400 million euros in the project. The project is designed to provide 300 thousand electric vehicles.