Tesla has long dominated the electric vehicles (EV) sector thanks in a large part to the company’s vertical integration and ability to maintain control over the supply of the materials that it needs. However, Tesla’s top spot in the market could be compromised as other automakers look to strike deals with key metals suppliers.
Brazilian mining giant Vale SA is looking to separate the metals unit in 2023, which is one of the largest nickel and copper operations, and has already attracted interest from several car companies, including Tesla’s rival General Motors.
According to Bloomberg, General Motors is one of the companies that has moved to the next phase of obtaining a minority share in Vale’s metals unit, which may raise $2 billion through a partnership with another company for the venture.
This isn’t the first time the two companies have done business. Last year, Vale and GM signed a long-term supply agreement for battery-grade nickel which will see Vale supply 25,000 metric tons annually of contained nickel – enough to supply approximately 350,000 EVs every year – from its proposed plant in Québec, Canada.
Vale’s metals unit, which is valued at $20-$25 billion, has also garnered interest from Japan’s Mitsui & Co.
Meanwhile several other automakers like Ford and Volkswagen, have signed long-term mineral supply deals to secure materials for their EV batteries. Last year, Volkswagen formed a joint venture worth €3 billion (US$ with Belgium’s Umicore for cathode materials. Meanwhile, Tesla struck nickel and cobalt deals with BHP Group and Glencore, respectively, in 2021. In March of that year, Tesla also entered a mining venture in New Caledonia.
It’s no surprise automakers are racing to secure more nickel supply – Demand for nickel used in EVs is expected to grow up to 40-fold by 2040, according to the International Energy Agency. Meanwhile, Vale sees demand increasing by 44% by 2030 as companies strive to meet clean energy goals.
Rising demand and the supply squeeze has kept nickel prices well above $25,000 per tonne since November and they are expected to remain elevated for the foreseeable future despite increased production from Chinese nickel giant, Tsingshan.
The Nickel Sector Offers Major Opportunities to Investors
In its recent market report, The Oregon Group predicts that pressure on battery-grade nickel supply will increase in the coming years due to the wave of electrification intensifying worldwide.
The Oregon Group is widely regarded as a financial industry authority. Anthony Milewski and Justin Cochrane, two independent capital markets experts, founded this investment research firm.
Milewski has worn many hats in the mining industry, including consultant, founder, financier, and investor.
Milewski and The Oregon Group predict investment in nickel should be pouring into select projects in key jurisdictions as companies and entire countries seek security of supply.
The report, titled The Green Economy and Nickel’s Generational Class I Supply Crunch, examines some of the big trends at play in the nickel sector, including the green economy, energy transition, security of supply, geopolitics, and the disrupting impact of ESG.
Here are some of the key catalysts the report covers:
- The battery industry is expanding so quickly that all eyes are on Class I nickel supplies. Analyst forecasts differ, but the consensus is for exponential growth. According to Wood Mackenzie, batteries accounted for 7% of overall nickel consumption in 2021 but will increase to 40% by 2040, resulting in a doubling of worldwide nickel demand. This projection, however, does not address the challenges associated with the refining of Class II nickel into Class I nickel. In other words, the market is still dealing with a Class I nickel supply bottleneck; the only issues are how severe it is and how long it will endure.
- For years, China had little meaningful opposition as it established its supremacy in the battery metals and rare earth supply chains. State-backed enterprises could invest, collaborate, and enter into partnerships as they saw fit to get the necessary resources while making it impossible for competitors to do the same. Finally, the West is waking up at the eleventh hour. As it does so, previously speculative investment prospects are beginning to take shape.
- With carbon border levies, growing consumer dissatisfaction with items derived from environmentally “dirty” metals, and a variety of other activities, Chinese-controlled nickel is on course to lose some of its price advantages. However, for that to matter, the West requires new sources of supply that meet certain criteria. What’s the good news? It has enormous undeveloped deposits in its own backyard.
With battery-quality nickel demand expected to expand exponentially in the long run, and limited sources of high-grade supply, The Oregon Group argues that ignoring sulfide resources believed to be “poor grade” may soon become unsustainable in a world thirsty for battery-grade nickel products.
This report provides in-depth analysis of the nickel market, major trends that will impact it over the next decade, and nickel supply and demand dynamics. It also includes a list of nickel investment options including exploration and development companies, ETFs and others.
The Class I nickel deficit is not going away anytime soon and will continue to put upward pressure on prices for some time. If you haven’t already, now is the time to consider becoming involved in the nickel market.
You can read The Oregon Group‘s The Green Economy and Nickel’s Generational Class I Supply Crunch report in its entirety by clicking here.
SOURCE The Oregon Group
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