Ford Reaches Every Corner of the World to Secure Raw Materials
- July 26, 2022
- Posted by: Quatro Strategies
- Category: Manufacturing
Ford’s efforts to secure raw materials resulted in a list of mining companies that cover every region in the world, from Argentinian lithium to Indonesian nickel. Ford’s agreements, including the ones with mining giants Rio Tinto and BHP, are the latest signs of how big automakers are rushing to secure more raw materials to prevent future shortages. One of Ford’s most consequential deals was the one that put iron at the forefront of the company’s electrification plans.
Surging battery metal prices have hit automakers’ profitability this year and concerns have grown that raw material shortages could hamper electric vehicle (EV) revolution. Western automakers primarily use nickel-cobalt-manganese (NCM) batteries. In addition to soaring metal costs, cobalt comes with another set of worries because the vast majority of reserves are in the Democratic Republic of Congo.
The other type of battery, lithium-iron-phosphate (LFP), is cheaper and more stable, but generally seen as less powerful than NCMs. However, technology has been developing, thanks in large part to Chinese battery manufacturer Contemporary Amperex Technology Co. Ltd. (CATL). Tesla announced last year it would shift to LFPs for standard-range cars as part of efforts to reduce costs.
Ford also followed Tesla’s lead and signed a deal with CATL to buy a large volume of LFPs. The company also said last week that it has ramped up efforts to sign long term supply agreements with the world’s largest miners, refiners and battery makers.
The company will still be exposed to any price volatility in lithium, which have surged much more than other metals. But iron is far more affordable than cobalt or nickel, which will reduce costs for the company and reduce supply risks.
If successful, Ford’s bet could further strengthen iron’s role in the electric-vehicle revolution.
Ford also announced a list of agreements on both nickel and lithium, although most of them are non-binding and involve plans to “explore opportunities.” It did announce a binding off-take agreement for lithium carbonate from a project in Nevada, among several announcements related to local processing of battery materials in North America.
While Ford’s LFP move seems risky given the concerns about its performance, both the automaker and its partner CATL have previously defy doubts with their technological innovations. Ford was criticized when it switched out the steel used in the body of F-150 trucks in favor of aluminum, but the move ultimately proved highly successful.
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