Tesla and BHP Nickel Supply Deal: Securing Resources for EV Demand

Tesla Secures Nickel Supply from BHP

Tesla is establishing a nickel supply agreement with BHP, a leading global commodities producer. This strategic move underscores the automaker’s commitment to directly sourcing the raw materials essential for battery production, anticipating a significant surge in demand before the end of the decade.

Partnership Details and Sustainability Focus

BHP’s Nickel West division will provide an unspecified quantity of nickel sourced from its mining operations in Western Australia. Beyond the supply agreement, the two companies will collaborate to enhance sustainability within the battery supply chain.

A key focus of this collaboration will be identifying and implementing strategies to reduce carbon emissions across both organizations, leveraging renewable energy sources coupled with energy storage solutions.

The Importance of Nickel in Battery Technology

Nickel is a crucial component in lithium-ion batteries, forming a fundamental element of Tesla’s next-generation battery chemistry.

While conventional lithium-ion batteries often utilize cathodes composed of nickel, manganese, and cobalt, Tesla is pursuing an alternative approach.

During the 2020 Battery Day presentation, Elon Musk announced plans to invest in nickel-rich, cobalt-free cathodes for select vehicle models, citing the potential for increased energy density.

Tesla’s Ambitious Battery Production Goals

Tesla has publicly stated its intention to substantially increase battery cell production over the coming years. The company initially aimed for 100 gigawatt hours of battery production by 2022.

However, Tesla’s long-term vision extends to an even more substantial capacity of 3 terawatt hours per year by 2030.

Expanding Nickel Sourcing Efforts

To achieve these ambitious production targets, Tesla is actively pursuing purchase agreements with prominent nickel producers worldwide.

Earlier this year, a partnership was announced with a nickel producer located in New Caledonia, a French Pacific territory.

Subsequently, Tesla chairperson Robyn Denholm confirmed the company’s intention to procure approximately $1 billion worth of battery minerals annually from Australia.

Elon Musk’s Call to Action for Nickel Miners

Elon Musk has consistently encouraged mining companies to increase nickel production. During a July investment call, he offered long-term, substantial contracts to producers who could efficiently and responsibly extract nickel.

He emphasized the importance of environmentally sensitive mining practices, stating Tesla would provide a “giant contract” for those who meet these criteria.

At Battery Day, Musk reiterated the need to avoid constraints related to nickel availability, directly appealing to mining CEOs to increase output.

Challenges in Sourcing Sustainable Nickel

Securing a nickel supply that aligns with environmental principles presents a significant challenge. Issues related to current recovery and smelting methods contribute to this difficulty.

Furthermore, certain mining operations, such as those in Indonesia – the world’s largest nickel producer – have faced criticism regarding their reliance on coal and waste management practices.

BHP’s Commitment to Sustainable Operations

BHP asserts that its nickel operations are among the most sustainable globally, and Tesla’s partnership can be viewed as an endorsement of this claim.

In February, BHP announced that up to 50% of the electricity powering one of its nickel refineries would be sourced from solar energy.

Projected Growth in Nickel Demand

Currently, the steel industry accounts for the vast majority of global nickel consumption. However, demand from the electric vehicle (EV) and energy storage sectors is poised for substantial growth.

The International Energy Agency projects a more than 4,000% increase in nickel demand over the next two decades – rising from 81 metric tons in 2020 to 3,352 metric tons by 2040.

Nickel West’s Evolving Role within BHP

Historically, Nickel West has represented a relatively small portion of BHP’s overall business, overshadowed by its iron ore, copper, and petroleum divisions.

BHP had previously attempted to sell Nickel West several times since 2015, but appears to have reconsidered its position in light of the anticipated surge in demand from the EV and energy storage markets.