tesla motors' gigafactory to increase tech metal demand
Post on 04-Aug-2015
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What will Tesla Motors' Gigafactory mean for
higher tech metal demand?
Tesla Motors makes the world’s most advanced electric cars run on electric
batteries. Tesla CEO Elon Musk wants to manufacture those batteries in America
and is planning to launch a $5-billion project named the "Gigafactory." Musk’s
dream project could be completely operational by 2020, prompting the requisite for
battery-grade materials like graphite and lithium. Japan’s Panasonic will be the
majority investor in the Gigafactory.
Tech metal investors should keep an eye on the news, because this one plant would
essentially double the world's output of electric vehicle (EV) batteries. That's
500,000 batteries a year at capacity. The idea is to drive down the cost of EV
batteries by 30% or more. Tesla is focusing on the supply chain to build the lowest-
cost batteries possible. If it can make the cost of its cars much cheaper, it should
spark mass uptake of electric vehicles. It's a plan to turn the world electric, in a
sense.
This increase in battery output will require a significant amount of raw materials
needed to build its batteries. Tesla plans to be producing about 1,000 electric cars a
week by the end of 2014 at its Fremont Factory, up from about 600 a week. By 2020,
the future Gigafactory is expected to produce enough batteries for 500,000 Tesla
electric cars a year, which is the approximate capacity limit of the Fremont Factory.
Electric cars will increase the demand for technology metals significantly. The cars
are generally powered through “the grid” but increasingly through solar arrays
locally. These use silver and a mix of other technology metals in their chemistry.
They use lithium ion batteries in general and the net weight of lithium used per
battery is higher in electric cars. For instance, the battery pack of a Nissan Leaf
weighs about 300kg while the Tesla S’ weighs about 340kg. In the operation, tech
metals are used in electric motors and regenerative breaking. The recovery of tech
metals from electric cars remains a big issue. Recycling of lithium is simple but there
is no infrastructure in place yet.
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Graphite, lithium and cobalt are the main raw materials for EV batteries. Demand
for materials such as cobalt, lithium, aluminum and copper will surely be impacted
by the unparalleled scale of Tesla’s GigaFactory. Tesla builds a plant to produce EV
batteries in the U.S. while others already exist in Asia. The commercial battery
industry is really an Asian one, centered on Japan and South Korea. The startup of
Telsa’s battery plant is expected in 2017, and then it would reach capacity in 2020.
It is projected that, such a plant is definitely going to have an impact on the graphite
industry. Graphite, both natural and synthetic, is used as the cathode in a battery.
The Gigafactory will create greater competition for the world's graphite and
ultimately result in higher graphite prices. If Tesla chooses to use natural
flake graphite, the demand for battery-grade material could go up 154%. If the
supply of the right quality material isn't there, supply squeezes and price
spikes are so obvious.
It is estimated the global demand for cobalt alone from the Tesla Gigafactory will
increase by 20%. The metal is also used as a cathode material in lithium-ion
batteries. Tesla envisages the production of enough rechargeable lithium-ion
batteries each year by 2020 to power 500,000 Tesla vehicles. Lithium, the second
largest input mineral by volume, will see demand increase by 25,000 tonnes a year
from a Gigafactory at capacity. Mined as a mineral and processed into a chemical,
lithium is used as the cathode material in both hydroxide and carbonate form.
The prices of technology metals vary due to rises and falls in the demand. If
investors know when a price is about to snap, then that is one way to make money.
The investor should be monitoring these trends to have strong knowledge of what
has happened in the past because, generally, that is what will happen again in the
future.
About Electio Middle East
Electio Middle East is an international commodity brokerage focusing primarily on
Technology Metals. Electio is the largest brokerage in its sector and the first
company worldwide to offer a niche investment platform enabling judicious
investors to diversify their portfolios into the Tech Metals Sector.
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