Last week, I sat down with Rodney Hooper and Howard Klein of RK Equity for another chat about nickel and lithium mining, electric vehicle batteries, Tesla, the electric vehicle transition, and a few other matters. Listen into the first part of that conversation below, or check out my brief summary of some highlights in the text below.
We started off chatting a bit about the Ford F-150 Electric using NMC 9.5.5 batteries, which is a further step into nickel dependence from the NMC 811 batteries the market had just moved to (following a shift to from NMC 111 to NMC 442 to NMC 622 before that). Ford is supposed to be getting such batteries from SK Innovation, a major EV battery producer out of South Korea that is also building a battery factory in Georgia, USA.
9/.5/.5 is the new 811?
Ford F-150, best selling USA pickup truck for 40 years. Electric version 2023 – supplied by SK Innovation, Georgia.
Will compete w/ Tesla Austin Cybertruck/Semi/Y for raw materials
— Howard Klein (@LithiumIonBull) August 10, 2020
Rodney noted that producing safe NMC 9.5.5 batteries is harder than many assume, and mentioned that two NIO EVs have caught fire recently using CATL’s NMC 811 cells. Managing thermal runaway becomes harder with very high nickel and lower cobalt content. Note that CATL is not qualified to supply Western OEMs with 811 cells — Tesla declined to use CATL’s cells in its Model 3 Long Range and went with LG Chem instead.
We also talked a little bit about Ford’s overall EV plans and battery supplies. How many electric vehicles (EVs) could Ford produce if demand was sky high? It appears that 300,000 by 2023 is the limit according to current plans (across all electric models), but that is not 100% certain.
We then took a little bit of a dive into vertical integration in the EV battery world, particularly Chinese battery giant CATL integrating more components of the business while its top competitor, South Korean giant LG Chem, seemingly lags a bit in that respect, leading to a bit more supply risk.
— Howard Klein (@LithiumIonBull) August 11, 2020
Rodney and Howard emphasized that it’s not entirely clear where that $2.5 billion CATL is investing in upstream and downstream parts of the business is going. It’s not even clear how much is going toward integrating more upstream parts of the business versus how much is going toward integrating more downstream parts of the business.
The RK Equity analysts do discuss some specific partnerships, though, such as a recent equity investment and off-take agreement with Australian-listed spodumene producer Pilbara Minerals and a prior agreement with Quebec’s North American Lithium. They indicate that CATL seems to be more firm/aggressive about securing its own supply chain than most Korean or Japanese battery companies, though Pilbara is also in talks about a joint venture with Korean steel maker POSCO, which is commissioning a large cathode plant in Korea and aspires to make its own hydroxide as well. And soon after we spoke, another Australian listed company Orocobre announced a memorandum of understanding to deepen its partnership with Japanese players Toyota and Panasonic for lithium hydroxide production.
Rodney also went on a detailed explanation of the showdown currently occurring between nickel miners/producers and companies in need of cheap nickel, like Tesla, Volkswagen, CATL, and LG Chem. Just taking Tesla as an example due to Elon Musk’s recent plea to nickel producers, Rodney points out that Elon was emphasizing wanting efficiently produced nickel (cheap nickel), as well as surely having a preference for environmentally respectful mining, but that nickel miners and producers need a certain price level in order to be able to justify putting in the capital expenditures. How will this showdown resolve itself? And what are the implications for battery prices, battery supply, electric vehicle prices, and electric vehicle supply?
Returning to a topic we discussed in previous conversations, I asked for more insight into the option of Tesla or someone else with a low cost of capital helping to finance new mines, since miners typically have a rather high cost of capital. Howard initially brought this idea up in one of our previous podcasts (and I’m sure before that) and I find the idea very appealing since it seems like an easy thing some of those giant corporations needing cheap nickel or lithium can do in order to help bring down costs. Howard mentioned in this podcast that a couple of companies were recently able to get 5% interest rate financing from two French banks, rather than the 11–15% of two years ago. This may relate to certain sustainability objectives and a growing realization that governments can support the EV revolution by doing more to support mining for battery minerals. Though, governmental policy on this topic — current and under consideration — is not entirely clear. Howard postulates that mining may be seen as too “taboo” for strong government support. He offers some great context, though, and details on how this could work, noting that Japan has done this selectively for years for certain industries, including for rare earth minerals.
We talked a little bit about the likelihood that a Biden administration would look to offer similar support or do other things to help EV battery mineral production in the United States. With Biden’s clear focus on helping blue-collar industries and bringing jobs back to the country — as Obama and Biden did very quite effectively for cleantech and other industries during Obama’s presidency — I think it would be a given that Biden would support the battery mineral mining industry in the United States at this point in time. Though, we’ll have to wait to see, and we’ll first have to wait to see what happens in early November at the ballot boxes.
I again recommend also checking out this interview with Rodney on the EV Stock Channel on the topic of nickel, especially as it relates to Tesla’s needs:
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