Sounds like a slow negotiation process with Tesla if Glencore and BHP started discussions last October, 9 months for BHP. Obviously the Glencore talks were faster because of their supply of Cobalt being more critical due to cobalts bigger supply constraints.
The sourcing of Nickel Sulphate from Nickel West's Kwinana Refinery is great news for BHP as it help BHP diversify into the battery metal sector with a major car manufacturer rather than export into the traditional stainless steel sector.
What this BHP-Tesla deal indicates is Australia is regarded as a long term, politically safe and reliable supply source of Nickel Sulphates. BHP would be hedging its sales on a combination of long term sales contracts that include bulk supply discounts and a portion set aside to take advantage of spot metal pricing volatility for upturns in the cyclically commodity prices.
If the nickel sulphate will be exported from Kwinana in WA to Tesla's gigafactories in Shanghai or mainland USA then this indicates Australia is positioned ideally for the sale of its battery metal commodities. Kwinana is also fast becoming a lithium refinery hub for the Australian battery industry with multiple lithium refineries under construction and/or being commissioned at the moment.
These types of deals with major battery metal producers (BHP, Glencore) is removing existing Ni-Co Sulphate supply from the current market. The deal helps Tesla meet its EV production targets for the next couple of years as more sedans are produced and the imminent release of the Tesla Semi will notably adsorb a fair proportion of battery materials. But the deal helps Sunrise Energy Metals move up the supply chain pecking order as the next best source of battery metals for the EV sector.
As the battery metal consumption is forecast to grow exponentially in coming years then Sunrise offers a perfect source of battery metal feedstock once the process plant is operational.
The easy deals with existing suppliers are disappearing as all their production is being removed from the market. Now the harder deals with future battery metal suppliers to meet 2025 sales forecasts will be required to ensure no shortfalls arise.
SRL Price at posting:
$1.83 Sentiment: Buy Disclosure: Held
