Tesla has secured a lithium supply contract with Ganfeng Lithium Co, the world’s largest producer of battery-grade lithium.
China’s Ganfeng Lithium Co Ltd and its unit GFL International Co Ltd announced in a filing on the Shenzhen Stock Exchange today that they signed a three-year supply agreement with Tesla.
Ganfeng didn’t confirm the amount of lithium that they will supply to Tesla, but they said that the agreement starts in 2022.
In order to help accelerate the transition to electric transportation, Tesla has become increasingly involved in the raw material supply chain for battery cells.
Despite only now starting the production of its own cells, the automaker has been securing the supply of lithium, nickel, cobalt, and other minerals for its battery cell suppliers.
Tesla started to not only deal with established mining companies, but also started to sign contracts for off-take agreements with junior mining companies looking to build new mining projects that would increase the supply of some critical resources for batteries.
However, these contracts are more volatile as the projects need to make it to production, and they often face challenges.
Earlier this year, a North Carolina lithium project that Tesla had a supply agreement with fell behind schedule.
But Ganfeng Lithium is a different beast as the world’s largest lithium producer.
Securing long-term contracts with large producers like Ganfeng is crucial for automakers looking to produce large volumes of electric vehicles.
Battery manufacturers and automakers are all trying to secure those contracts as lithium prices are rising.
Last month alone, the price of lithium hydroxide monohydrate used in li-ion battery cells went up 25%.
Electrek’s Take
With these prices going up quickly, I think it’s important that we increase the supply because it’s only the beginning.
The real volume is going to come in the next three to four years.
I wish automakers and battery manufacturers would do more large-scale off-take agreements with new mining projects in order to help finance new production capacity.
Otherwise, we are going to see an even bigger squeeze in the next year.
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