Tesla increases lithium order with Yahua Group
Tesla has extended its existing contract with China’s Yahua Industrial Group to supply lithium for its electric car batteries for another five years until 2030. And it significantly expanded the quantities supplied.
The renewed contract calls for the purchase of 207,000 to 301,000 tonnes of battery-grade lithium hydroxide from 1 August 2023 to 31 December 2030. The previous contract was for 63,000 and 88,000 tonnes over a five-year period until 2025. The new supply volume of up to 301,000 tonnes, however, refers to the entire contract period, not just the period of the extension from 2025 to 2030.
There is a simple reason why the range is quite large at 94,000 tonnes: “The supply volume in each year during this period, as well as the supply prices, shall be determined by mutual agreement,” Yahua informs. It is more of a framework agreement than a concrete supply agreement. Tesla is one of Yahua’s biggest customers. According to the Chinese company’s financial report, Tesla bought material worth 2.4 billion yuan (307 million euros) in 2022, which corresponds to 17 per cent of total sales.
According to Argus, the price for a tonne of lithium hydroxide ex-works reached a record high of up to 73,000 euros (original figure in the article: up to 571,000 yuan per tonne). On 1 August 2023, however, the price per tonne was back at 250,000 to 275,000 yuan, the equivalent of 32,000 to 35,200 euros per tonne. If one takes the current price and the maximum agreed delivery quantity as a basis, this results in a calculated order value of 10.6 billion euros. However, since the prices and quantities are always being redefined, as mentioned above, the actual sum could be significantly lower – or even higher.
Yahua currently produces up to 73,000 tonnes of lithium salts per year at its plant in Sichuan province, including the battery-grade compounds lithium hydroxide and lithium carbonate. By the end of 2025, production capacity is to be more than doubled to 173,000 tonnes. Lithium hydroxide is mainly used for the production of NCM/NCA batteries, while lithium carbonate is more commonly used for LFP batteries. Since Tesla has secured lithium hydroxide from Yahua, it is therefore probably for the NCA batteries for the long-range and performance variants.
Yahua’s customers also include the Korean battery manufacturers SK and LG. Yahua will supply SK New Energy, the Chinese offshoot of SK, with between 20,000 and 30,000 tonnes of lithium hydroxide from 2023 to 2025, and LG Energy Solution with up to 30,000 tonnes in the same period. In April this year, LG Energy Solution and Yahua had agreed on the production of lithium hydroxide in Morocco.