Ganfeng Lithium lands three-year supply deal with Tesla

Ganfeng Lithium (SHE: 002460), China’s no.1 producer of the battery metal, has signed a new contract with Tesla to supply the electric vehicles maker with battery-grade lithium hydroxide products for three years starting in 2022.

The world’s top lithium miner by market capitalization did not provide details on price or volumes agreed in the deal, but said that information would be determined by Tesla’s purchase orders.

Based on the EVs maker’s disclosed plans, the transaction worth would be significant. Tesla expects to start initial operations at its two newest factories by the end of 2021. It has also said it would likely ramp up production at its Gigafactory Berlin and Giga Texas facilities in 2022.

Market rumours suggest that Tesla may finally start producing next year vehicles such as the Cybertruck and the Semi. Both of these prototypes use the hyped 4680 battery, which promises more range for less cost.

The enlarged, cylindrical 4680 cell, which Tesla first teased at its Battery Day in September 2020, could fulfill Elon Musk’s dream to build 20 million EVs a year.

Ganfeng had signed a supply deal with Tesla in 2018, through which it committed to provide the car maker with a fifth of its lithium production. 

Today’ announcement follows an agreement between Tesla and New Caledonia’s Prony Resources, which guarantees the US firm about 42,000 tonnes of the metal needed to produce the batteries that power its EVs. 

With the adoption of electric vehicles gaining traction globally, analysts expect key battery raw materials, including lithium, nickel and cobalt to extend this year’s gains as the race for new supply heats up.