Refining, Tesla’s next frontier – CleanTechnica

In this article, I’m going to highlight a truly outstanding YouTube channel, “The Limiting Factor”, and in particular a recent video summarizing battery news from Tesla’s recent Q1 earnings call. This 80 minute video contains enough material to do about 10 articles, but I will highlight 3 related points that I hope will add value to Jordan Giesige’s already excellent analysis.

    • Lithium supply is the material that Tesla is most worried about in the medium to long term (4 to 10 years).
    • Refining lithium is more likely to be a problem than extracting the raw material.
    • Tesla pressures its suppliers and analyzes their operations (from a battery perspective).

Why lithium, not cobalt, nickel, iron, phosphate, manganese is the biggest problem

Source: The Limiting Factor

The reasons are different for each mineral.

  • Cobalt is a problem because it is rare, not widely available, expensive, and its extraction has been linked to poor labor practices in Africa. The good news is that the industry has been working for years on ways to reduce its use and many new batteries, including white-heated lithium-iron-phosphate batteries (on the market, not at actual temperature), n do not use cobalt. Cobalt costs $82,000 per ton and the price has gone up 82% this year!
  • Lithium Iron Phosphate (LFP) batteries will solve nickel, cobalt and manganese supply problems for products that use them, but not all products can perform well with its lower energy density by weight and volume . But won’t he just trade one supply problem for another? The answer is mostly no. Even if Iron and Phosphate were as rare and limited as Cobalt, Nickel and Manganese (and they are not), this would be a big win, as it would allow you to double production. But Tesla knows we don’t need to double battery production, we need to scale it 100 times. Fortunately, we mine 1000 times more iron than nickel, so while we may need to change iron refinement, we probably don’t need to increase iron ore mining to make a lot of batteries. Similarly, phosphate is already widely mined for fertilizers, but some expansion might be needed as we don’t want to jeopardize the fertilizer we use in our food production (although I think we will need less food production as we learn to produce more protein efficiently than using cows and chickens). Iron ore prices are down 24% last year and are cheap at $142 a ton, while phosphate prices are up 86% but still cheap at $178 a ton.
  • Nickel will be a problem, but not as big a problem as lithium because it has better substitutes. The price was up 70% from a year ago to $32,000 a ton, but down from the peak caused by the start of the Russian invasion of Ukraine.
  • Demand for manganese appears to be skyrocketing, but since it is widely used in steel production, the market can absorb some of the increased demand without the price spikes we see for nickel and lithium. The price is up 9% from a year ago, but is only around $5 a tonne for raw ore. However, refined metal is of course more expensive and can go up to $4,000 per ton.
  • Lithium is the biggest problem because we don’t have a good off-the-shelf substitute. Although there are only 5 to 10 kilograms of lithium in an electric vehicle, the problem is that we have substitutes for cobalt and nickel and we do not need substitutes for the others, because they are not not so rare or in serious shortage. The main alternative which is experiencing a certain commercial momentum is sodium. Sodium is super cheap and common. The problem with sodium batteries is the same as with all batteries, not enough density and it’s not quite ready for commercial deployment. The world’s largest battery manufacturer, CATL, unveiled a product last year, but I’ve yet to see a vehicle using it. Lithium prices have soared 414% over the past year and cost around $70,000 a ton!

The shortest history of Tesla in the world

  • First, Tesla built the motors and batteries and bought the car body from Lotus. Tesla just bought batteries designed for laptops and battery modules and packs designed to cool them and put them in cars.
  • Then Tesla decided to make the whole car, the Model S.
  • Tesla had a hard time convincing its suppliers to take it seriously until around 2018. That would require battery makers to massively ramp up production, but they just didn’t believe electric cars were going to succeed and Tesla didn’t have enough cash to secure its orders. These successful battery companies had seen many companies come and go and could not spend billions of valuable capital if the market did not materialize.
  • Finally, in 2014, following the unexpected success of the Model S, which won an incredible number of Car of the Year awards, especially significant for Tesla’s first ground vehicle design, Tesla announced that it would build a gigafactory to build as many batteries as possible. everyone else in the world together (with a partner). It was a very bold move 8 years ago, but if Tesla hadn’t taken that risk, it wouldn’t have been able to grow as quickly as it did.
  • Even though battery manufacturers have dramatically increased production, they still don’t seem to realize the size of the market or have the courage to take advantage of the opportunity. In 2020, Tesla had the resources to take the next step. He’s bought a few battery technology startups and announced he’ll start making 4680 batteries. He doesn’t want to replace existing manufacturers – he just wants to supplement whatever he can get from others with his own production.
  • So now Tesla intends to make 20 million cars and plenty of stationary batteries to support the 20 TWh per year of batteries needed to transition the world to clean energy. This is an increase in production of about 200 times over the 10 years from 2020 to 2030.
  • Now that Tesla has spent 2 years producing the 4680 battery and paid off almost all of its debt, it’s time for Tesla to make another BIG bet. Many think it will be mining, but that’s two steps backwards. There are many large mining companies and Tesla can negotiate contracts with them to get the raw materials it needs. The conversation with a typical miner would go like this: Let’s say the miner produces one million tons a year of the raw ore that Tesla planned and sells half to others and the other half to Tesla’s suppliers. Tesla would read their financial statements and find that they have proven reserves of 100 million tons of materials and probable amounts of another billion tons of unproven reserves. But the company has only a thousand employees and would need at least 10,000 employees and $100 million in capital to expand 100 times and produce 100 million tons a year instead of 1 million. tons per year. Can the current management handle such growth? Can they raise that much money from their investors? Tesla would likely loan them money and provide them with a long-term contract that they could use to invest in the mining equipment they need. Then Tesla would also start buying back mining rights to expand in about 5 years when they realize that miners are unwilling or unable to change their processes fast enough to meet industry needs. [Editor’s note: This idea to help finance the mining was put out there about a year ago on CleanTech Talk, and probably well before that elsewhere. It still seems like a critical step toward Tesla’s goals. —Zach Shahan]

Refine the conclusion

Source: The Limiting Factor

Now, for refining the many materials needed to manufacture the vast number of batteries, this is the exciting expansion that Tesla will soon announce. Tesla realizes that the refining industry is technical and complex and could greatly benefit from Tesla’s first-principles engineering talent and money to fund whatever needs to be done. I doubt Tesla is refining all battery materials, probably only those they think are at risk. But even huge markets like iron do not refine enough battery-grade iron, even though there is a lot of raw iron produced.

What benefits is Tesla looking for?

  1. Controlling its supply is its first objective.
  2. Cut costs to make its products more affordable.
  3. Ensure that the environment is protected.
  4. Application of first principles of engineering.
  5. Locate refining near giga-factories or mines, preferably near both to reduce transportation costs.

I look forward to Tesla’s next move!

Disclosure: I am a shareholder of Tesla [TSLA]BYD [BYDDY]Nio [NIO]XPeng [XPEV] and Hertz [HTZ]. But I am not offering investment advice of any kind here.



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