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Ford wants to sell more of the company’s electric F-150 Lightnings. That means more batteries. And more batteries mean more demand for metals like lithium, copper, and nickel.
Jeff Kowalsky/AFP via Getty Images
The demand for electric vehicles is exploding worldwide, straining the supply chain of battery materials for electric vehicles. Car manufacturers such as
ford
And
Tesla
looking for supplies of these key components.
Ford engine
(Ticker: F) signed on Thursday agreement with a subsidiary of the global mining giant
valley
(VALE) and China
Zhejiang Huayou cobalt
(603700.China) to “advance more sustainable nickel production in Indonesia and help make batteries for electric vehicles more affordable”.
Along with copper, aluminium, iron, cobalt and of course lithium, nickel is one of the metals used in lithium-ion batteries for electric vehicles. Batteries containing nickel are typically more expensive because they have better energy density characteristics. There is more energy per unit volume and nickel-based batteries are used in applications that require longer range.
The world mined about 3.3 million tons of nickel in 2022. Indonesia is the largest source, contributing about 1.6 million tonnes to the total.
Most of the nickel is used to make stainless steel alloys. A growing splinter is for lithium-ion batteries. Global nickel demand has grown at an average annual rate of about 4% over the past 25 years. Demand growth could accelerate to around 5% or 6% per year on average over the next decade due to electric vehicles.
Batteries accounted for around 10% of total nickel demand in 2021. That could account for about 20% of total demand by around 2035, when electric vehicles make up about half of all new car sales. Around 10% of all new cars sold in 2022 were exclusively battery electric or plug-in hybrids.
Ford relies heavily on electric vehicles. On Thursday, the company unveiled its new financial reporting structure and announced that it will no longer report financial results for its auto business by region – instead it will report results for its traditional auto business, commercial consumer business and EV business.
Ford lost $2.1 billion on electric vehicle sales in 2022. The loss is partly a function of the size and high battery cost. Ford sold almost 100,000 electric vehicles worldwide in 2022. That’s not enough to make a profit. The car business is about scale.
Tesla
(TSLA) was not consistently profitable until it shipped about 400,000 units annually.
Ford’s goal is to ship around 1 million electric vehicles by 2026, with continued growth thereafter.
Expanding the battery materials supply base can also help Ford turn EV losses into profits. The company hopes to reduce the cost of batteries by about 40% from current levels in the coming years. Lower commodity prices, which may result from higher supply, account for about 25% of the overall targeted improvement.
Not only Ford thinks of nickel. In 2022, Tesla and
General Motors
(GM) also signed agreements with
valley
to ensure a reasonable growth in supply of nickel.
Automakers are also very interested in lithium. Demand for lithium has grown at an average rate of about 11% per year over the past 25 years and is expected to grow at least as fast over the next decade. The reason for the faster growth is the mix of end uses of the metal. Much of the lithium produced today is used in lithium-ion batteries.
GM, Ford, Tesla and others have signed deals with lithium miners and invested directly in companies to ensure lithium production keeps pace with demand.
Copper is another key metal. EVs will suffer less as less than 10% of the world’s copper goes into light vehicles. Most copper still ends up in construction applications. Think of wiring for homes.
Demand has grown by about 3% annually over the past 25 years. A battery electric vehicle has about three times as much copper as a conventional car. The shift to electric vehicles could increase copper’s growth rate by an average of about 1 percentage point per year for the coming decade.
The number of global automakers investing in copper has not yet matched the number for lithium and nickel.
Stellantis
(STLA) is a copper investor that is announcing an investment of approximately $140 million in a Canadian miner with a project in Argentina.
Ford shares rose 2.5% in early trading on Thursday. The
S&P500
And
Dow Jones industry average
increased by about 0.6% and 0.5%, respectively. It’s not just about nickels. GM shares rose 1.7%.
At the start of trading on Thursday, Ford shares were down about 30% over the last 12 months. Rising interest rates and rising car prices are creating more investor demand for new vehicles as monthly car payments become more expensive as the economy slows.
Write to Al Root at allen.root@dowjones.com
Source : www.barrons.com