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Vale and Tesla in talks to secure nickel supply for batteries

Tesla is the world's biggest electric car manufacturer and Vale is the world's biggest nickel miner

Vale SA (ADR) -

The nickel price ticked up modestly this morning as a reports that Brazilian miner Vale (NYSE:VALE) is in talks with Tesla (NASDAQ:TSLA) about a secure supply of nickel.

Nickel is one of the key components that Tesla uses in the manufacture of batteries for its electric vehicles, and in recent months there has been concern about possible bottlenecks in supply.

Tesla chief executive Elon Musk even tweeted that he hoped nickel companies would develop new ‘ethical’ projects now, and not just after the price had risen.

Although that remark displayed a certain disconnect from the realities of mining economics, it did nevertheless put the nickel industry on notice.

And Vale, with its long-standing and well-known Canadian operations at Sudbury and Thompson and elsewhere, can at least tick a clear box as regards the ‘ethical’ side of things.

As battery manufacturers move to reduce the amount of cobalt in their batteries it is likely nickel will be used to fil the gap. The proportion of nickel used in batteries has been rising for some time with the most recent iteration, the NCM 811 battery, containing 80% nickel.

Not everything is hunky dory with nickel. There is more danger of combustion with higher nickel content batteries, especially if they are left plugged in, and several reports of nickel-related battery fires have come out of China this year.

Nevertheless, nickel as a major component in batteries is here to stay, and it’s perhaps not surprising to note that the nickel market is forecast to be in deficit to the tune of 40,000 tonnes this year.

Demand for nickel for use in lithium-ion batteries is forecast to rise to between 1.4mln and 1.8mln tons by 2030, according to broker SP Angel.

This would represent around 30% of total nickel demand up from 6% this year.

The majority of nickel is sourced from Indonesia which instituted an export ban as of January 2020. There have also been issues processing ore from another of the world’s major suppliers, the island of New Caledonia.

Quick facts: Vale SA (ADR)

Price: 15.33 USD

NYSE:VALE
Market: NYSE
Market Cap: $78.64 billion
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