Tesla Locks-in a Three Year Deal with Ganfeng, China’s top producer of lithium

According to a recent Bloomberg report, Ganfeng Lithium Co – China’s largest lithium manufacturer has agreed to supply battery grade lithium-hydroxide to Tesla.

  • The “Strategic Co-operation Proposal” will run from January 1, 2018, to December 31, 2020 and may be extended for three years. The annual purchase capacity is about 20% of Tesla’s current production.
  • The deal follows Tesla agreement in May this year with Australia’s Kidman Resources to supply lithium.
  • “Kidman’s deal with Tesla, which is for an initial three-year term on a “fixed-price take-or-pay basis” from the first product delivery, features two three-year term options.”

As auto manufacturers around the world rush to build electric vehicles, companies are securing lithium supply by locking-in multi-year deals with mining companies. “Ganfeng Lithium Co is one of the world’s leading Lithium manufacturers, established in China in 2000 and listed on the Shenzhen Stock Exchange since 2010.”

It is not unusual to see large companies like Tesla and Apple taking a direct path to secure lithium and cobalt supplies by striking a deal with manufacturers. Early this year, Reuters reported that “Apple Inc is talking to major cobalt producers to secure supplies of the material vital for the lithium-ion rechargeable batteries that power its mobile phones.”

Both Tesla and Apple have a massive need for lithium-ion batteries and their requirements are growing every year.

Tesla is targeting 50 gigawatt-hours battery capacity for Gigafactory, 35 gigawatt-hours marked for vehicles and 15 gigawatt-hours for storage. Tesla will need lithium hydroxide in the order of tens of thousands every year to support its increasing battery production. Ex more such deals to follow in the future.