Lithium crisis encourages car companies to buy mines

2 min. reading
Commodities, Global investments by Third-Parties / 13 June, 2022

Karla García Gil Journalist

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The automotive industry is concerned that there may not be enough supply of metals such as lithium, nickel, copper, among others, to meet the demand for electric vehicles by the end of the decade, which has encouraged some companies such as Tesla to take an interest in the mining sector.

The lithium crisis, for example, extends from its price to its scarcity. On the one hand, the cost has skyrocketed in recent years, so that in 2012 a ton cost only 4,450 dollars and this year it has climbed to 78,032, an accelerated rise. On the other hand, it is not properly speaking a shortage of the element itself, since lithium is found almost everywhere on our planet, what happens is that its rate of extraction and refinement is slow, so it is not possible to meet the demand.

In this context, Tesla could go directly into mining, unless prices improve. It should be noted that in 2021 the company patented a lithium extraction system and has reached an agreement with Ganfeng Lithium, the world’s largest supplier of the metal, to guarantee its supply.

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Advantages and disadvantages of investing in commodities

Raw materials are objects that we obtain from nature and that serve as inputs in the production of derived products. For example, cotton is the basis for the textile industry, or petroleum for the polymer industry.

Tesla, while it has metals contracts with suppliers around the world, its goal of producing 20 million vehicles by 2030 will require many more. Last year, the company did not produce even one million electric vehicles.

It should be noted that the automotive giant has no experience in the mining industry, so experts have advised it to focus on buying existing operators, which would cost considerably less than the $44 billion that Tesla CEO Elon Musk offered to buy the social network Twitter.

Another company that has joined the intentions of penetrating the mining sector is Volkswagen, which announced an agreement with Vulcan Energy to buy lithium, in addition to allying with Umicore and 24M Technologies for the production of batteries. Similarly, General Motors and BMW are investing in lithium mining in places such as California and Argentina.

Despite the above, lithium is not the only problem hindering battery manufacturing. Nickel, for example, has risen more than 90% so far this year, leading the London Stock Exchange to suspend trading indefinitely.

One of the reasons why no automotive company has decided to buy mines and start extracting minerals directly is because of the time it would take and the high cost; however, the door remains ajar to this possibility.

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