Executives from Car Companies Visit Mining Industry Events Amid Electric Vehicle Raw Material War

Executives from the Complete Vehicle Industry Attend Mining Conference
"$10 Trillion Worth of Metals Needed by 2050"

From the 26th of last month (local time) to the 1st of this month, the 'Global Metal & Mining Conference' was held over four days in Hollywood, Florida, USA. Hosted by BMO Capital Markets, the 32nd conference gathered over 1,500 stakeholders from the metals and mining sectors in one place. High-ranking executives from Tesla, Ford Motor Company, and Mercedes-Benz Group appeared at this event, which was attended by key metals and mining officials from major countries including the United States, Canada, the United Kingdom, and China.

Dan Barclay, CEO of BMO Capital Markets (Photo by BMO Capital Markets Twitter)

According to Bloomberg on the 5th, Dan Barclay, CEO of BMO Capital Markets, introduced in his opening remarks, "This year, many leaders from automakers striving to secure minerals necessary for electrification have attended." Although BMO Capital's parent company, Bank of Montreal, did not disclose the scale of automaker attendance, representatives from U.S. electric vehicle companies Rivian, Stellantis, and Jaguar Land Rover were also reported to have appeared at the event.

Automaker representatives attending the event actively met and engaged in discussions with metals and mineral companies. It is known that automakers have recently significantly expanded their mineral procurement teams, hiring experts in key metals and minerals such as lithium and manganese.

Trent Mell, CEO of Electra Battery Materials, a mining company based in Toronto, Canada, conveyed the atmosphere, saying, "(Automakers) were holding separate meetings with many companies like ours, trying to understand and solve supply chain issues," adding, "In the past, there were only one or two employees responsible for mineral procurement."

Ilhan Bahar, Global Head of Metals & Mining at BMO Capital Markets, said in an interview with Bloomberg just before the event, "There is an urgency that we could not see years ago," and added, "Three to four years ago, even if we sent invitations to automakers, they would have been deprioritized." He also noted that automakers mainly attend the event as investors.

◆ "Minerals are the core cost of EV batteries"

The reason high-ranking automaker officials are increasingly appearing at metals and mining events is due to the fierce competition in securing raw materials essential for electric vehicle production, such as lithium, which is the 'food' of the automotive industry.

According to Bloomberg's estimates, metals worth $10 trillion (approximately 13,000 trillion KRW) will be needed by 2050 for electric vehicle production. In particular, lithium, one of the key metal materials for EV batteries, has seen its consumption value soar from about $3 billion in 2020 to $35 billion in 2022 when converted to spot market value. Lithium demand is expected to increase more than sevenfold from 2021 to 2030.

[Image source=Reuters Yonhap News]

Recently, automakers have reiterated the importance of securing essential metals. Tesla's Chief Financial Officer Zachary Kirkhorn mentioned during the earnings announcement on the 1st that lithium was a major cause of Tesla's price increases. Despite the core lithium benchmark price plunging by about one-third this year, Bloomberg reported that lithium prices remain 590% higher than at the beginning of 2021. Besides Tesla, Volvo, NIO, and Stellantis also reported impacts from rising raw material prices.

Andrew Miller, Chief Operating Officer of Benchmark Mineral Intelligence, a mineral data provider, evaluated, "Investment in raw materials will be a factor that allows automakers to control margins and maintain competitiveness along with their supply chains," adding, "Minerals have now become the largest cost factor in batteries."

◆ All investment methods mobilized including equity acquisition and long-term contracts

Automakers are mobilizing investment methods such as acquiring stakes in mining companies and signing long-term contracts to directly secure essential raw materials. Tesla has begun considering the acquisition of Canadian lithium mining company Sigma Lithium. Earlier, Tesla CEO Elon Musk mentioned that lithium prices had risen excessively and said, "If cost issues do not improve, we will have to engage directly in large-scale mining and refining operations."

General Motors (GM), which declared it would catch up with Tesla in the electric vehicle sector by 2025, announced a $650 million equity investment in Canadian lithium mining company Lithium Americas and is considering purchasing some shares of Brazilian mining company Vale. Ford has also provided loans for mining projects.

Mercedes-Benz signed a contract at the end of last year to receive an average of 10,000 tons of lithium annually worth 1.5 billion euros (approximately 2.1 trillion KRW) from Canadian company Rock Tech Lithium, and BMW signed a six-year lithium purchase contract with Australian company European Lithium, prepaying $15 million as a contract deposit.

Kent Masters, CEO of Albemarle, the world's largest lithium producer, stated at the conference that automakers are placing senior executives instead of novice officers to handle mineral procurement issues. He added, "We have been able to change the level of communication with such clients, and they are investing huge amounts of money in electric vehicles."