The Russian invasion of Ukraine has had a tremendous effect over the supply of nickel, a critical ingredient in EV batteries.
With Russia being one of the world's biggest producers of nickel (17% of global capacity for refined Class 1 nickel), prices tripled over two days in mid-March when it became clear that the military operation started on February 24 would be lasting.
While the price has settled since, with nickel currently trading 30% higher than before the invasion at the London Metal Exchange, the nickel crisis continues to affect many electric vehicle manufacturers. Not Tesla, apparently.
The US EV maker reportedly signed secret deals with several nickel suppliers since 2021, including a multiyear supply contract with mining giant Vale SA. The as-yet-unannounced agreement covers nickel from Canada, unnamed sources told Bloomberg.
As opposed to most EV makers, Tesla has spent years focusing on how to secure its own nickel supplies as part of Elon Musk's focus on vertical integration to maintain control over the company's supply chain.
"People don't realize how far ahead Tesla is when it comes to securing the supply chain for raw materials and an integrated approach to battery materials."
Todd Malan, spokesman for Talon Metals
Gallery: Tesla Battery Day 2020
While the Brazil-based miner didn't comment on its agreement with Tesla, it said that it plans to increase its sales to the EV market to 30-40% from 5%.
Besides the deal with Vale, Tesla has several other contracts with nickel mining companies, all forged over the last year. In January, the EV maker committed to buy 75,000 metric tons of nickel concentrate from a project being developed in Minnesota by Talon Metals Corp.
Earlier agreements are with the world’s biggest mining company, BHP Group, for material from Australia, and the operators of a nickel mine in New Caledonia.
The Tesla CEO repeatedly said that nickel supply was the company's biggest concern as it boosts production. He is right to be worried as demand for nickel for the battery sector is expected to rise to about 1.5 million tons in 2030 from 400,745 tons this year, according to Bloomberg NEF.
On an earnings call two years ago, Musk urged mining companies to produce more nickel.
"Please mine more nickel. Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way."
Nickel is a key component for the cathodes of EV batteries, and Tesla uses nickel-based chemistries for its longer-range models.