Tesla secures Texas Terafactory lithium
Will source NC spodumene for battery factory near Austin Metal Tech News – September 30, 2020
Last updated 10/13/2020 at 5:06pm
Just a week after Tesla Battery Day 2020, where CEO Elon Musk unveiled the electric automaker's massive lithium-ion battery ambitions, the iconic electric automaker has cut a deal to buy some of the lithium it will require for this plan from a mine in North Carolina and has begun moving ahead with a Texas refinery to transform the raw lithium concentrates into the form needed for its batteries.
These two moves will shorten Tesla's North American mines-to-electric vehicle supply chain, which is currently dominated by China.
"Lithium's foundations for the 21st century are beginning to shift in what is a China-dominated part of the lithium-ion battery and electric vehicle supply chain," said Benchmark Mineral Intelligence Managing Director Simon Moores.
It was Benchmark Mineral Intelligence that confirmed Tesla's plans to build a plant capable of transforming lithium concentrates into the lithium hydroxide that will be needed at Texas Terafactory, a massive battery and EV manufacturing facility Tesla is currently building on the outskirts of Austin.
"Tesla is the first automotive OEM to enter lithium production – a watershed moment. And it does so without having to mine lithium from the ground," Moores said.
Instead, the electric carmaker has entered into a deal with Piedmont Lithium Ltd., an Australian mining company with a lithium mine project in North Carolina, to begin delivering lithium concentrates to the Texas refinery in the next two to three years.
"We are excited to be working with Tesla, which represents the start of the first US domestic lithium supply chain and a disruption to the current value chain," said Piedmont Lithium President and CEO Keith Phillips.
Tera is the new giga
The deal with Piedmont and the Texas lithium refinery begin to reveal how Tesla plans to meet the lofty objectives the ambitious automaker laid out to the world on Battery Day.
During the Sept. 21 event, Musk elevated Tesla's battery production objectives from billions of watts of storage per year to trillions of watts.
"So tera is the new giga – and a terawatt is a thousand times more than a gigawatt, said the Tesla CEO. "So, we used to talk in terms of gigawatts, in the future, we'll be talking in terms of terawatt-hours ... this is what's needed in order to transition the world to sustainability."
The electric automaker estimates it will take about 10 TWh per year of battery storage production to obtain Musk's vision of electrifying the entire global fleet of vehicles. This is more than 45 times the current global lithium-ion production capacity, a sector that has already grown roughly 10-fold in the past decade.
For its part, Tesla plans to ramp up its in-house battery producing capacity to 3 TWh/year over the next decade.
"Long-term, we're expecting to make on the order of a 3,000 gigawatt-hours or 3 TWh per year," said Musk. "I think we've got a good chance of achieving this actually before 2030, but I'm highly confident that we could do it by 2030."
"It's a lot of batteries, basically," added Drew Baglino, Tesla's senior vice president of powertrain and energy engineering.
This also equates to an enormous amount of the mined materials that go into these batteries – lithium, nickel, manganese, cobalt, graphite, silicon, aluminum, and iron.
While the Battery Day event was long on ambitions, it was short on details of Tesla's strategy to secure the materials it needs to build its vision – an omission likely as much about corporate strategy as it was about the time it would take to fully outline its plans.
Earlier this year, however, Musk said vertical integration – where one company becomes involved with two or more stages of production normally operated by separate companies – is extremely important to Tesla's world-changing ambitions.
One of the reasons Musk sees vertical integration as vital to Tesla is his view of complex and inefficient mines-to-terafactory supply chain that sees battery materials mined on one continent, shipped to another for refining, and shipped to yet another to be put into batteries.
"If you put a GPS tracker on a molecule from when it got mined to when it was in a usable product, it would look insane," he said.
It has been estimated that the lithium in batteries travels an average of 31,000 miles, or more than one trip around the world, before it reaches the customer.
Any traffic jam along this supply chain – whether it be at the mine, refinery, or battery facility – will be a limiting factor for Tesla growth.
Another limiting factor is a mining sector that would be better likened to cargo ship than a speedboat in terms of maneuverability to meet rapidly changing market demands.
"Tesla has clearly come to the realization that it cannot rely on the upstream of the supply chain or investors to expand quickly enough for its needs," said Moores.
The other major facet of Tesla's vertical integration strategy is stabilizing the price of raw materials as global markets adjust to the supply-demand dynamics of the burgeoning and rapidly expanding lithium-ion battery sector.
"Having control of advanced material costs into the EV supply chain is an increasingly important factor in lowering battery prices," said Andrew Miller, product director at Benchmark Mineral Intelligence.
For this reason, Tesla is endeavoring to establish mines-to-EV supply chains near major markets – North America, Europe, and Asia for starters.
"We're going to go and start building our own cathode facility in North America and leveraging all of the North American resources that exist for nickel and lithium," said Baglino. "And just doing that – localizing our cathode supply chain and production – we can reduce miles traveled by all the materials that end up in the cathode by 80%, which is huge for cost."
Win-win lithium deal
The deal with Piedmont provides insight on how Tesla can keep the costs of the minerals and metals its needs stable as the mining sector scrambles to keep pace with the demands of a lithium-ion battery sector that could see nearly 30-fold expansion over the next decade – if Tesla was to meet its 3 terawatt target and the other global battery makers matched the American automaker.
By way of comparison, Benchmark estimates that total worldwide lithium-ion battery production for 2020 will be in the 210 to 220 GWh range.
As its name implies, Tesla's Texas Terafactory, currently under construction near Austin, is slated to produce 1,000 GWh (1 TWh) of batteries per year. This will also be where the Tesla Cybertruck will be built.
Tesla will also be producing cathodes, the positively charged side of the batteries, at a newly announced plant to be built next to Texas Terafactory.
With the Sept. 28 deal with Piedmont, Tesla has sourced a large portion of the lithium it will need for this cathode facility.
The agreement covers a fixed commitment for Piedmont to supply Tesla with 160,000 metric tons of spodumene, a lithium mineral, per year.
Benchmark said this spodumene equates to roughly 8,000 metric tons of lithium hydroxide, or about half of what the battery market analysts expects will be needed at Texas Terafactory.
Piedmont said the contract represents about one third of the miner's expected production at its coming North Carolina mine and Tesla has the option to acquire additional quantities, if needed.
Importantly, the lithium will be sold at a fixed price over the five-year term of the agreement – which should be good for Piedmont on global oversupply of the battery metal early on and good for Tesla as the massive expansion of battery plants drives demand and price of lithium higher.
With a secured buyer, Piedmont can confidently move ahead with bigger plans to help feed lithium into the battery metals market.
"We will now accelerate our mine/concentrator development to support Tesla's plans, work to further expand our mineral resources, and potentially increase our planned annual spodumene concentrate production capacity," said Piedmont's Phillips.
Piedmont is planning to deliver spodumene to Tesla when the Texas cathode refinery is complete, somewhere between mid-2022 and mid-2023.
Benchmark expects Tesla to cut similar deals for additional battery materials and other carmakers to move further up the supply chains as they shift more of their production to EVs.
"Tesla's efforts to move upstream will likely be replicated by other auto manufacturers, and in other areas of the supply chain," said Miller.