OEMs move upstream to secure battery materials
Original equipment manufacturers (OEMs) and end-users are increasingly moving upstream in the supply chain to secure critical battery minerals to accelerate the transition to vehicle electrification and industrial decarbonisation.
The latest proof of this trend is top tier automaker Stellantis this week extending by five years to 2035 a lithium hydroxide offtake agreement with Vulcan Energy Resources for supply from its Zero Carbon Lithium project in Germany, as well as making a $76mn equity investment in the firm to become its second-largest shareholder.
Stellantis, which has 16 brands — including Fiat, Peugeot, Citroen, Jeep and Chrysler — has one of the largest electric vehicle (EV) and decarbonisation plans of any automaker, aiming for 100pc EV sales in Europe by 2030. It is investing heavily in EV battery manufacturing plants in Europe and the US.
In the 2022 edition of its annual Mine report released earlier this month, accounting and financial advisory firm PwC highlighted the trend of OEMs and end-users partnering directly with mining firms to secure critical minerals, particularly raw materials for lithium-ion batteries. It also said that mining firms are increasingly evolving into producers of value-added products — such as lithium carbonate, lithium hydroxide, nickel sulphate and active anode materials — as they seek to capture downstream margins.
"OEMs are entering joint ventures, partnerships and offtake agreements with mining companies and processors to secure supply," PwC said. "If this direction of travel continues, we expect to see OEMs become directly involved with critical minerals mining."
Stellantis is the second automaker to have an equity stake in an offtake agreement with a lithium developer. China's Great Wall Motors was the first, when it developed investment and supply ties with Australia's Pilbara Minerals a few years ago.
With analysts and research firms forecasting a lithium supply deficit of 800,000-1.2mn t by 2030, it is unsurprising that OEMs are eager to secure raw materials in a more direct way. They want to have more control over their supply chains in an uncertain environment.
Automakers and battery cell manufacturers have already entered a number of offtake agreements and partnerships with lithium, nickel and graphite producers in Australia, Argentina, Brazil and Indonesia.
More such deals are likely as nervous OEMs watch the prices of raw materials for battery cathodes and anodes. While nickel has retreated following a price spike in March, at more than $24,000/t it is still more than 30pc higher than in late June last year as a result of supply-related concerns. Lithium has cemented its significant 18-month price recovery on surging demand factors. Pilbara Minerals' pre-auction sale this week of 5,000t of spodumene concentrate for a record price of $6,350/t would not have gone unnoticed, along with the firm's comments about customers' continued healthy appetite for supply. The first digital auction for spodumene in July last year attracted a winning bid of $1,250/t, reflecting the extent of price strength and market demand over the past year.
US-based Tesla has been the most prolific automaker in securing supply agreements. It has lithium offtake agreements with Australian developers Core Lithium and Liontown Resources, as well as nickel supply agreements with Australia-UK resources firm BHP and Brazilian resources firm Vale for nickel from Canada. It also has an offtake agreement with Australia's Syrah Resources for graphite-based active anode material from its Vidalia plant in the US state of Louisiana.
In April, another US-based automaker, Ford Motor Company, entered an initial agreement with Lake Resources, which is utilising direct extraction technology to produce lithium at its Kachi project.
Related news posts
![](/_next/image?url=%2F-%2Fmedia%2Fproject%2Fargusmedia%2Fmainsite%2Fimages%2F14-generic-hero-banners%2Fherobanner_1600x530_generic-c.jpg%3Fh%3D530%26iar%3D0%26w%3D1600%26rev%3D-1%26hash%3DFC2BEDE406483FEF5FDB9549159BAC11&w=3840&q=75)
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more