- China’s largest EV maker BYD becomes second automaker to take a stake in a major lithium miner in $630m deal
- VW becomes first Western automaker to invest in nickel production in Indonesia
- Major ASX movers this week: All the big ones
Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, manganese, magnesium, and vanadium.
During the ICE (internal combustion engine) age, the idea that a carmaker would invest directly in metal and mining operations to ensure supply was unheard of.
As recently as 2019 it was merely a light “topic of conversation”; now, miner and carmaker tie-ups are real and becoming realer every day.
This is the EV age, and things are different. The wild battery metal shortages that analysts like Benchmark were warning us about are here, magnified by unanticipated events like war and COVID.
They have forced carmakers to jump directly into bed with mining companies to consummate supply deals.
China’s largest electric carmaker BYD recently became the second automaker to take a stake in a major lithium miner, Benchmark says.
The RMB 3 billion (~$630m) deal to acquire 5% of Shenzhen-listed Chengxin Lithium is a way for it to secure supplies of the battery raw material following a surge in prices.
The deal was made after it failed to secure “stable” lithium supplies from the market due to rapidly rising lithium prices last year, BYD says.
Following the investment Chengxin said it would provide lithium to BYD at “preferential prices”.
“Gaining preferential lithium pricing through investment should allow BYD to keep its costs under control,” Maynie Yang, analyst at Benchmark, says.
VW locks in nickel, cobalt supply deal
VW recently became the first Western automaker to invest in nickel production in Indonesia, the world’s biggest producer, in a deal for enough nickel and cobalt to make over 2 million EVs.
The German carmaker, alongside producer Huayou Cobalt and stainless-steel maker Tsingshan, will form a joint venture to develop annual production of 120,000 tonnes of nickel and 15,000 tonnes of cobalt.
It will help VW reduce battery costs by 30% to 50% over the long term, VW said.
The deal marks a significant move by the world’s second-largest carmaker to secure the cathode raw materials it needs to expand production of electric vehicles for the Chinese market, Benchmark says.
BUT … Indonesian nickel is dirty
Nickel is becoming a key concern for automakers since most of the new supply this decade is set to come from Indonesia, a country run on coal-fired power, Benchmark says.
The metal’s high carbon footprint could make it difficult for automakers to meet their emission reduction targets.
“The amount of CO2 produced for a tonne of nickel from Indonesia can be as high as 97 tonnes,” says Bruna Grossl, LCA practitioner at Benchmark.
“That’s made lower-carbon nickel from outside Indonesia a hot – and scarce – commodity, especially following Russia’s invasion of Ukraine.
“The invasion has created uncertainty about whether automakers will accept nickel from Norilsk Nickel, which has a deal to supply metal for electric vehicles to German cathode maker BASF.
“The company, which is led by billionaire Vladimir Potanin, has not been sanctioned by any government.”
Yet.
Sure makes Aussie based battery metal/critical mineral players look attractive over the short, medium, and long term.
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