Lithium demand is skyrocketing: Analyst
Ford Motor Co. peppered investors with new battery-material sourcing agreements in a show of how it’s solidifying the supply chain it will need for a massive expansion in electric-vehicle production.
The two biggest names among the various companies that announced deals with Ford on Monday — U.S.-based Albemarle Corp. and Chile’s SQM — are the world’s largest producers of lithium. Those pacts are among five disclosed on Ford’s investor day that flesh out how the carmaker expects to make 2 million EVs a year by 2026, and keep expanding from there.
The availability and expense of crucial battery materials — which along with lithium include nickel and cobalt — have been key concerns for years among automakers trying to build out their electric lineups. The issues have gained more urgency in recent months due to rising competition to strike supply pacts, wild swings in raw material costs and the Biden administration’s push for companies to reduce their reliance on China for critical minerals.
“The mining part is not the constraint. It’s really the processing,” Ford Chief Executive Officer Jim Farley said in a Bloomberg Television interview. “So turning those raw materials, especially lithium and nickel, into processed materials we can put into a slurry to make the cells themselves.”
This is the second time in less than a year that Ford has announced direct deals with battery metals producers, following a series of agreements announced in July. The latest pacts include:
- Albemarle supplying more than 100,000 metric tons of battery-grade lithium hydroxide for about 3 million Ford EV batteries starting in 2026, and continuing through 2030
- SQM ensuring supply of battery-grade lithium carbonate and hydroxide that will help Ford vehicles qualify for consumer tax credits included in the Inflation Reduction Act
- Canada’s Nemaska Lithium delivering as much as 13,000 tons of lithium hydroxide per year, with Ford becoming the first customer of the company backed by Quebec’s government and Livent Corp., the world’s third-largest lithium producer
- EnergySource Minerals and Compass Minerals supplying lithium products they expect to produce in California and Utah, respectively, starting in 2025
Ford appeared to be lagging competitors in terms of lithium supply, despite signing an off-take agreement last year with Liontown Resources Ltd., David Deckelbaum, a TD Cowen analyst, said in a note. The flurry of deals announced Monday put it “well ahead” of most auto manufacturers, he wrote, and highlights what will be the most likely path that companies take to secure supply, as opposed to mergers and acquisitions.
Ford is staging a two-day event in Dearborn, Michigan, this week to convince investors on the merits of its plans for a 16-fold increase in EV production in the span of just a few years. The company is “pretty much done” locking up the mining capacity needed to reach its 2026 production goal, Farley said.
The CEO noted the processing constraints Ford is facing are partly political. The Biden administration is coaxing companies to depend less on China by making EV incentives subject to requirements that components and materials are sourced from North America and US free trade partners.
“On-shoring the processing is going to be the most important controller of cost and also politics,” Farley said. “Eighty percent of the processing for nickel and lithium are being done in China, and we need to localize that.”
With assistance from Thomas Biesheuvel, Mathieu Dion and Yvonne Yue Li.