Automotive|Energy|Iron Ore|Mining|Motors|PROJECT|Projects|Refinery|Refining|Resources|supply-chain
Automotive|Energy|Iron Ore|Mining|Motors|PROJECT|Projects|Refinery|Refining|Resources|supply-chain
automotive|energy|iron-ore|mining|motors|project|projects|refinery|refining|resources|supply chain

Panic over metals for EVs goes all the way to automakers' C-suites

6th March 2023

By: Bloomberg


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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, Ford Motor and Mercedes-Benz Group 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, Nio and Jeep-maker Stellantis 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 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 February 28 earnings call.

General Motors last year struck a prepayment deal for lithium, while Ford Motor 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, COO 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's base metals unit. Tesla, which is constructing a metal refinery in Corpus Cristi, Texas, has studied a takeover of miner Sigma Lithium. 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.”

Volkswagen 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’s head of commodities.

“It always ends in tears,” he told Bloomberg Radio. “It requires an expertise that is very different than producing cars.”

Edited by Bloomberg




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