Ford goes directly to miners for lithium, nickel supply to support EV ambitions

Ford Motor Company (NYSE: F) announced plans to accelerate its EV production that are underpinned by several high-profile agreements with lithium and nickel miners to supply raw materials for the vehicles’ batteries. 
 
The U.S-based automaker said in a news release that it has secured “100% of the battery supplies” it needs to produce 600,000 EVs per year by the end of 2023, and with the help of Chinese battery company Contemporary Amperex Technology (CATL) it could make 2 million EVs by 2026. 
  
It plans to invest more than US$50 billion in EVs through 2026, targeting total company adjusted EBIT margins of 10% and 8% EBIT margins for EVs by 2026. 
 
“Ford’s new electric vehicle lineup has generated huge enthusiasm and demand, and now we are putting the industrial system in place to scale quickly,” said Ford president and CEO Jim Farley, who is also president of Ford Model e. “Our Model e team has moved with speed, focus and creativity to secure the battery capacity and raw materials we need to deliver breakthrough EVs for millions of customers.”  
 
Ford said it will source battery cell raw materials through a set of agreements —– mostly non-binding memorandums of understanding (MOU)s on projects that are not yet in production — with nine mining companies. The announcements follow on agreements EV leader Tesla (NASDAQ: TSLA) has also made with nickel, lithium and graphite miners.

Agreements span the globe

Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) signed a non-binding MOU with Ford to develop more sustainable and secure supply chains for battery and low-carbon materials for its vehicles. 
 
Materials covered in the deal include lithium, low-carbon aluminum and copper, Rio Tinto said in a statement. 
 
The lithium would be supplied in an off-take agreement from Rio Tinto’s Rincon project in Argentina, currently under development, though it was unclear how much of the metal would be provided to Ford.

Among the other lithium supply deals Ford has secured is a binding, off-take agreement with Australian miner ioneer (NASDAQ: IONR: ASX: INR) for 7,000 tonnes of lithium carbonate annually over a five-year period starting in 2025.

The carbonate would come from its 100%-owned Rhyolite Ridge lithium-boron project in Nevada. The deal would represent about 34% of annual output from Rhyolite Ridge in the first five years of production.  

James Calaway, the Sydney-based company’s executive chairman said the agreement with Ford marks a milestone for ioneer and highlights “the mature state of the Rhyolite Ridge project development and its ideal position to serve the U.S. supply chain with domestic battery materials. 

“Partnering with a recognized world-class automaker that exemplifies the spirit of American innovation is a testament to the quality of our lithium carbonate, and our commitment to the highest environmental standards and sustainability practices,” Calaway said.   

Ford plans to use ioneer’s lithium carbonate to make batteries for its EVs through BlueOval SK, a joint venture between the car maker and South Korea-based battery producer SK On. 

It also has a binding, off-take lithium agreement with another Australian miner Liontown Resources (ASX: LTR) for a five-year deal worth A$300 million ($267 million), the West Perth-headquartered company said in a news release in June. 
 
Under the deal, starting in 2024 Liontown will provide 75,000 tonnes of lithium-spodumene concentrate, 125,000 tonnes the following year and 150,000 tonnes between the third and fifth years. 
 
The concentrate will come from the company’s Kathleen Valley project in Western Australia, 680 km northeast of Perth, where first production is expected in the second quarter of 2024.
 
Kansas-based Compass Minerals (NYSE: CMP) is a fourth company that signed an agreement with Ford for lithium supplies. 
 
Its two-phase lithium brine development project in Ogden, Utah, is expected to produce 30,000 to 50,000 tonnes of lithium carbonate equivalent, with first phase capacity amounting to about 10,000 tonnes starting in 2025, the miner said in a news release.  

The companies are working towards a definitive offtake and supply agreement. 

LFP batteries  

Ford said the lithium iron phosphate (LFP) batteries supplied by CATL would be coming for its Mustang Mach-Es in North America in 2023 and for F-150 Lightnings in early 2024 and that it plans to localize 40 GWh per year of LFP capacity in North America in 2026.  

Commenting on the Ford announcement, Canaccord Genuity Global Sustainability analyst George Gianarkias said in his first Signposts in Sustainability newsletter on Thursday that (LFP) batteries will continue to gain momentum.  

“Ford sees a significant place for LFP batteries in its future portfolio relative to NCM (nickel cobalt manganese) [batteries],” Gianarkias said. ”LFP will serve standard range Ford EVs with NCM serving extended range. CATL… appears to be the runaway leader in LFP battery cell chemistry.” 

While NCM batteries have higher energy density, LFPs are generally cheaper by up to 30%.

Wood Mackenzie, in a report in March forecast that LFP units would continue to edge out NCMs for market share and surpass them in 2028.

However, economist and independent analyst Patricia Mohr said she wonders if U.S. buyers of the F-150 Lightning will still choose the longer-range NCM batteries, which she said have been preferred by OEMs and consumers in the U.S. and Europe. 

Nickel supply

In terms of nickel, Ford said it signed non-binding MOUs with Vale (NYSE: VALE), “to explore potential opportunities across the EV value chain,”; and Vale’s Indonesian subsidiary and Huayou Cobalt to explore a three-way nickel processing project that would give Ford rights to the equivalent of 84,000 tonnes of nickel.  

A third MOU, with BHP (NYSE: BHP; LSE: BHP; ASX: BHP) would provide nickel from the company’s Nickel West project in Western Australia starting as early as 2025 and could include more commodities later on. 

BHP’s head of corporate communications, Gabrielle Notley told The Northern Miner that details on the nickel supply would be determined through further collaboration.  

The Australian miner also aims to work with Ford on developing cleaner supply chains, Notley explained.  

“Mining and refining account for the majority of emissions in the nickel battery value chain,” she said. “Collaborating with Ford will provide opportunities to lower end-product related emissions, discover mutually beneficial ways to accelerate value chain decarbonization and ensure stronger ESG credentials for raw materials.”  

Notley cited agreements reached last year with other technology companies such as Tesla  for the supply of nickel from its Nickel West operation for battery technology supply chains.  

Tesla has over the past half year reached supply agreements with other critical mineral miners including a five-year deal with Liontown, an expected four-year deal with Core Lithium (ASX: CXO) and a multi-year agreement with Vale for nickel. 

GM also inked a deal with LG Chem for the supply of more than 861,000 tonnes of cathode active material (CAM) for EV battery production. CAM consists of processed nickel, lithium and other materials that represent about 40% of the cost of a battery cell. The agreement covers the second half of 2022 until 2030 and would be sufficient for about 5 million units of EV production.

GM and LG Chem will also look into the localization of a CAM production plant in North America by the end of 2025.

Jeff Morrison, GM vice president, Global Purchasing and Supply Chain said the company now has contractual commitments with strategic partners for battery raw materials to support its goal of producing 1 million units of EV capacity by the end of 2025. 

Ford and several mining companies did not respond to inquiries on details about the raw material projects by press time.