Ford strikes lithium deals to support increase in EV output

Oct 01, 2023

Ford Motor Co. reached a series of deals to buy lithium from projects in Canada to Chile, as automakers rush to secure the materials needed to build electric vehicles.

Ford has struck deals with Albemarle, the world's top producer, Chile's SQM and Canada's Nemaska Lithium, according to separate announcements Monday. The deals come ahead of the second day of an investor event focused on Ford's $50 billion plan for electric models. The agreements will look to take advantage of President Joe Biden's Inflation Reduction Act, which contains incentives for battery manufacturing and sourcing of materials from the United States and its allies.

The availability and cost of crucial battery materials, including nickel and cobalt, have been key concerns for years among EV makers trying to build out their electric lineups. The issue has gained more urgency in recent months due to rising competition to strike supply pacts with miners and project developers and by wild swings in raw material costs. Processing is the "limiting factor," said Ford Chief Executive Officer Jim Farley.

"The mining part is not the constraint. It's really the processing," Farley said Monday in an interview on Bloomberg Television. "So turning those raw materials, especially lithium and nickel, into processed materials we can put into a slurry to make the cells themselves."

This is the second time in less than a year that Ford has announced direct deals with battery metals producers, following a series of agreements announced in July. The latest pacts include:

-Albemarle supplying more than 100,000 metric tons of battery-grade lithium hydroxide for about 3 million Ford EV batteries starting in 2026, and continuing through 2030

-SQM ensuring supply of battery-grade lithium carbonate and hydroxide that will help Ford vehicles qualify for consumer tax credits included in the Inflation Reduction Act

-Canada's Nemaska Lithium delivering as much as 13,000 tons of lithium hydroxide per year, with Ford becoming the first customer of the company backed by Quebec's government and Livent, the world's third-largest lithium producer

-EnergySource Minerals and Compass Minerals supplying lithium products they expect to produce in California and Utah, respectively, starting in 2025

Ford appeared to be lagging competitors in terms of lithium supply, despite signing an off-take agreement last year with Liontown Resources, David Deckelbaum, a TD Cowen analyst, said in a note. The flurry of deals announced Monday put it "well ahead" of most auto manufacturers, he wrote, and highlights what will be the most likely path that companies take to secure supply, as opposed to mergers and acquisitions.

Ford is staging a two-day event in Dearborn this week to persuade investors on the merits of its plans for a 16-fold increase in EV production in the span of just a few years. The company is "pretty much done" locking up the mining capacity needed to reach its 2026 production goal, Farley said.

The CEO noted the processing constraints Ford is facing are partly political. The Biden administration is coaxing companies to depend less on China by making EV incentives subject to requirements that components and materials are sourced from North America and U.S. free-trade partners.

"On-shoring the processing is going to be the most important controller of cost and also politics," Farley said. "Eighty percent of the processing for nickel and lithium are being done in China, and we need to localize that."

Bloomberg's Thomas Biesheuvel, Mathieu Dion and Yvonne Yue Li contributed to this report.