Tesla/Glencore/Indonesia: scramble for battery metals will intensify
Threat of an Opec-style nickel cartel is credible but would be tricky to co-ordinate
A nickel mine in Central Sulawesi. About 38% of the world’s nickel supply comes from Indonesia © BloombergElon Musk can thumb his nose at Opec: an oil supply cartel holds no fears for an electric vehicle tycoon.
He cannot afford complacency when it comes to metals vital to EVs.
Indonesia is contemplating setting up an Opec-like cartel for nickel.
Both stories point to an intensifying battle for control of raw materials used in batteries.
But it is hardly surprising that Tesla’s talks with Glencore on buying 20 per cent of the miner foundered earlier this year.
It would make little sense for either side.
A £13bn shareholding would not guarantee fresh cobalt supplies for Tesla any more than it did for Japanese mills with holdings in Australian iron ore and coking coal miners in the 1980s.
If Tesla wanted to pay far above the market price for an extended contract, Glencore might consider diverting supplies.
But a deal at mates’ rates would leave other Glencore shareholders asking why Tesla was getting preferential treatment at their expense.
Tesla investors would meanwhile want to know why Musk had made them indirect investors in a business with a big coal mining operation.
The prospect of an Opec-style nickel cartel led by Indonesia is a more substantial possibility.
About 38 per cent of world nickel supply comes from the archipelago, with another 23 per cent from the Philippines and Russia. The nickel market is already in disarray.
Since a short squeeze in March, average daily nickel volumes have fallen by half on the London Metal Exchange.
The threat of a nickel cartel is credible, according to Liberum analysts.
It would be tricky to co-ordinate. Indonesia’s output depends on producers such as Xiang Guangda’s Tsingshan Holdings, which is headquartered in China.
Nickel miners based in western countries, such as Glencore and BHP, could face legal challenges if they joined a sellers’ club.
But mining laws give the Indonesian government plenty of power domestically.
In January, it halted thermal coal exports, including from foreign miners.
As the world’s largest exporter, that move rocked the coal market.
Expect supply shocks in battery materials too.
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