Tesla secures lithium supplies from Western Australia 2022-02-18
Lithium is the new oil.
The high demand due to the boom in electric vehicles is causing the prices for the battery raw material to soar. According to the market research company Benchmark Mineral Intelligence, lithium became more than 500 percent more expensive on average until this January. An end to the price increases is not in sight. While countries with large lithium deposits - Mexico, for example - are already thinking about nationalizing production, battery manufacturers are securing shares in new mining programs at an early stage. This is to avoid bottlenecks and ensure a certain control over prices.
Tesla is a pioneer here. The demand for lithium for its battery production is enormous, which is why the e-car pioneer now wants to contractually secure the supply of hundreds of thousands of tonnes of lithium-spodumene concentrate from a mine in Western Australia from 2024. Operator Liontown Resources also wants to supply Tesla supplier LG Energy Solutions. This means that a good 50 percent of the production in Kathleen Valley, which has not even started yet, has already been sold for the next five years.
The contract between Tesla and Liontown contains a price clause, according to which it is calculated according to a formula that also includes the reference market price for lithium hydroxide monohydrate. In addition, production in Kathleen Valley must begin no later than 2025 for the contract to be valid. However, Tesla is already hoping for 100,000 tonnes in 2024 and 150,000 tonnes the year after. Contract negotiations are still ongoing, with an agreement expected by the end of May. So far, Tesla has been sourcing its lithium material mainly from Chinese suppliers, who account for the largest shares of battery raw materials worldwide and whose production methods are controversial for environmental protection and labor law reasons. The production in Liontown in Australia, on the other hand, is to use 60 percent renewable energy.
In any case, news of the contract negotiations has boosted Liontown Resources' shares, which rose 18 percent on Wednesday, having already mirrored the rise in lithium prices since the end of 2020.