Tesla Signs Another Lithium Supply Agreement
Tesla Inc. recently signed a binding agreement to get lithium from Kidman Resources Limited in Western Australia.
The news came after Kidman Resources chose a site to develop a lithium processing plant through a joint venture with Sociedad Quimica y Minera de Chile (SQM).
Kidman will supply lithium hydroxide for an initial term of three years on a fixed price take-or-pay basis from first product delivery. The deal also contains two three-year term options. Other details remain confidential.
The company expects the processing plant be ready by 2021. The management is also looking to supply refined lithium to other renowned companies.
The demand for lithium is expected to increase over the next decade (or even longer) due to its need in rechargeable batteries in electric vehicles. Bloomberg calls it the “new gasoline” that will lead the change toward environmentally friendly cars.
Increasing demand for electric vehicles will drive more automobile companies to enter the space, which will further push the demand for lithium
Bloomberg forecasts electrical vehicle sales to reach $41 million by 2040, which will represent 35% of global new car sales.
Moreover, governments all over the world are focusing on legislation to reduce emissions. Once, these rules come into effect, customers will prefer electric cars instead of gasoline cars.
Companies like Tesla recognize the upcoming boom and are already securing supply to meet the burgeoning demand.
This puts lithium suppliers in the limelight. And it seems they will be banking on this publicity for a while.
According to Reuters, “forecasts of soaring demand for vehicles like Tesla Inc’s Model X and General Motors Co’s Chevy Bolt, have lifted lithium carbonate prices more than two times above early 2015 levels.”