Volkswagen is forming joint ventures with Tsingshan Group and Huayou Cobalt. With this, the automaker plans to secure cobalt and nickel supply for making EVs in China. It will cust costs to manufacture EVs in the world’s No. 1 car market, as the raw material prices are surging.
The joint venture is a part of the 30 billion euro ($33 billion) to push the automaker’s goals to build the battery cell factories network. So they secure more direct access to the raw materials that are needed to build batteries.
As a part of the joint venture, the three companies Volkswagen, Tsingshan, and Huayou Cobalt signed a memorandum of understanding. This venture will be in Indonesia where 10% of the world’s laterite nicker ore reserves are located. It will be focused on cobalt and nickel raw material production. Then at the final stage, the venture will be able to supply raw materials of EV batteries for 160 gigawatt-hours worth. This implies that this is an annual output of around 120,000 tonnes of nickel and 15,000 tonnes of cobalt according to the filing by Huayou to the Shanghai stock exchange.
Volkswagen’s second joint venture will be formed with Huayou in China’s southwestern Guangxi region for the refining of nickel and cobalt sulfates, precursor and cathode material production, it said. “The cooperation aims to achieve significant cost advantages, secure the raw material supply and achieve a transparent and sustainable supply chain,” it said. “The two partnerships target to contribute to the Group’s long term target of a 30-50% cost reduction on each battery.”
Global nickel prices have surged almost 400% this year due to the Ukraine crisis, as Russia is a major supplier and its invasion of Ukraine and the subsequent imposition of sanctions on Moscow by the West lit a fire under an already hot market.
Prices on the London Metal Exchange got a further boost on March 8 when they doubled to $100,000 per tonne in a matter of hours, after Tsingshan bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls. Prices have dropped sharply since then however after the LME was forced to halt trading for a period and reopened with new trading limits. Privately owned Tsingshan has become the world’s top nickel producer thanks to its development of a low-cost process to make the metal. It already has major investments in Indonesia, including other joint ventures with Huayou.