Tesla, Piedmont Amend Deal Over Lithium Supply

Tesla and Piedmont Lithium announced they have amended their deal for lithium supply amid a relentless price rally of the metal. 

“Piedmont and Tesla have mutually agreed to amend their previous offtake agreement with the terms of this new agreement, which are binding for a three-year term and include an option to renew for another three years. Under the amended agreement, Piedmont has agreed to deliver approximately 125,000mt of SC6 [lithium concentrate] to Tesla beginning in 2H23 through the end of 2025,” reads the press release.

The EV and critical battery materials landscape has changed significantly since 2020 and the agreement reflects the importance and growing demand for a North American lithium supply chain, said Keith Phillips, President and CEO, Piedmont: “This agreement helps to ensure that these critical resources from Quebec remain in North America and support the mission of the Inflation Reduction Act to bolster the US supply chain, the clean energy economy and global decarbonization.”

Unlike prior agreements where prices were locked in, the Australian mining company’s deal with Tesla now relies on a floating mechanism based on market prices. The change in the supply agreement is “significant,” asthe EV giant typically has fixed prices for the materials it needs for batteries, analyst David Deckelbaum told Bloomberg: “As more contracts shift toward variable pricing, Tesla’s lithium costs inevitably move higher.”

As the biggest buyer in a sector filled with startup miners, Tesla has leveraged its size to dictate terms, locking in long-term supply deals at fixed prices. However, a relentless rise in prices of key battery materials such as lithium, in addition to legacy automakers’ efforts to secure those materials are changing the landscape.

Lithium prices have soared 1,200 percent over the past several years as supply struggles to match the growing demand. According to BloombergNEF, the average price for a lithium-ion battery pack jumped 7 percent in 2022, the first increase since the group began its survey in 2010.

Lithium Price to Drop in 2023: Chinese Supplier

After two years of prices labeled as “insane” by Elon Musk, CEO, Tesla, and “unreasonable” by China’s BYD, lithium will become less expensive as more supply emerges to cut abnormally high margins for lithium producers, according to Wang Pingwei, President, Sinomine Resource Group Co, as reported by MBN.

“We believe the gradual, downward trend for lithium will continue next year,” said Wang, predicting a drop of around a quarter from current levels that will still leave the company with “good” profits. However, “prices will not fall off a cliff as the market remains tight,” he added.