To say the announcement by Tesla Motors Inc. that it intends to
build the worlds largest lithium-ion (Li-ion) battery
plant within the next three years has captured the attention of
the industrial minerals industry, would be an
|Tesla's Gigafactory could double the
worlds output of Li-ion batteries from 2013
Image: Tesla Motors
Teslas CEO, Elon Musk, is known for his big
ideas, most of which have turned into successful ventures that
have changed the way we use and think about technology. His
businesses include the online payment system, PayPal; solar
panel design and installation company, SolarCity; the space
travel pioneer, Space X; and, of course, electric vehicle (EV)
manufacturer, Tesla Motors.
Tesla, which brought both its Roadster and Model S electric
cars from development to driveways in little more than a
decade, revealed its latest idea, a $5bn Gigafactory, in
February this year. This plant would not only double the
worlds output of Li-ion batteries from 2013 figures, but
would also aim to be a catalyst for mass uptake of EVs.
By producing Li-ion batteries on a mass scale at the
Gigafactory, Musk believes Tesla can significantly drive down
the cost of the battery packs, the most expensive of all EV
components, by 30% and with it the price of EVs, in a move to
make them more affordable to consumers.
Tesla and Musk are aiming to replicate for EVs what Ford
Motor Corp. did for commercialising the market for
gasoline-powered cars, almost exactly 100 years ago.
The Gigafactory is expected to be up-and-running by 2017,
reaching full capacity by 2020. By this time, it will produce
500,000 EV Li-ion batteries per year, the majority of which
will be transported by rail to Teslas assembly plant in
An exact location for the plant has not yet been disclosed,
but Tesla has said that it intends to build the facility in
south-west US. This is interesting, as North America has little
or no current production of the key minerals that go into
making a Li-ion battery namely, graphite, lithium and
Doubling the worlds battery output will have a
significant impact on the consumption of these raw materials,
however, responsibly sourcing these minerals at the correct
specifications needed to manufacture batteries is Teslas
first major challenge.
Critical mineral sourcing
Sourcing niche, specialist minerals is not like sourcing
other commodities, such as iron ore, copper or bauxite.
Not only are these industries small and typically
over-reliant on a single country or region to produce the
majority of output, but the materials produced from them are
complex, with specialist manufacturing knowledge needed to
produce a marketable product.
For graphite, mining and processing is concentrated in China
and lithium production is mainly centred in Chile, while more
than half of the worlds cobalt comes from the Democratic
Republic of Congo (DRC).
Earlier this year, a Bloomberg news article citing
environmental problems connected with the production of flake
graphite in China first put these issues on Teslas
Following the report, the company announced it would source
all of its Gigafactory raw materials from North America, yet it
is likely this search will be widened to other areas such as
Africa, Europe and South America.
Used as the anode material in Li-ion batteries, graphite is
the largest input raw material by volume.
At present, Tesla uses both synthetically produced and
naturally mined flake graphite in its EV batteries, which it
buys from the Japanese technology company, Panasonic, which in
turn buys the mineral from China.
The challenge with todays supply structure is that
China produces 60% of flake graphite and nearly 100% of
battery-grade, spherical graphite.
IM Data estimates that Teslas
Gigafactory, at capacity, will need anything from 83,000 tpa to
126,000 tpa of flake graphite (consumed as smaller volumes of
Considering the flake graphite industry produced 375,000
tonnes in 2013, the volume increase potential to supply
Teslas one plant is clear.
If the company uses 100% natural spherical graphite, this
would equate to an increase of up to 34% of total flake demand,
or a 154% increase in demand from the battery industry. Similar
demand volumes can be expected if the company chooses synthetic
Used as one of the raw materials in a battery cathode,
cobalt presents a more extreme supply situation.
In 2013, 55% of global cobalt output was produced in DRC as
a by-product of copper mining.
Indeed, the majority of the worlds cobalt is derived
as a by-product of the mining of other metals, meaning outside
of DRC it is supplied globally in small volumes of between
3-7,000 tpa from countries such as China, Canada, Russia and
While the Tesla plant is expected to need only 7,000 tpa
battery-grade cobalt, a supply risk lies in the fact that there
are very few dedicated cobalt mines outside of DRC, which is
frequently riven by political turmoil and conflict and is one
of the highest risk countries in the world.
Also used as a cathode material, lithium faces the least
extreme supply situation in relation to the Gigafactory, but
ranks second in terms of volumes needed by Tesla.
The majority of the worlds lithium is produced in
Chiles Atacama Desert, which produced 54% of global
supply in 2013. The country has been stable source of lithium
carbonate for number of end markets, including batteries, since
beginning production from brine in 1996.
Other brine producers include Argentina and smaller volumes
from China. Australia is the leading producer of lithium from
spodumene rock, although the industry there is now controlled
It is estimated that the Gigafactory will require up to
25,000 tpa of lithium chemicals most likely lithium
hydroxide at full capacity. This represents a
significant increase on todays battery-grade lithium
demand of 50% and a 20% increase in overall demand.
Supply chain transparency
In the last three years, factors such as price volatility,
government policy and disruptive demand-side developments (like
Teslas Gigafactory) have affected the supply of critical
minerals for technologies like EV batteries, cell phones and
This has brought into question the supply chains for these
minerals and whether, small producers are ready for major new
demand increases from markets that require specialist,
processed products as opposed to commodities.
These developments have also put further pressure onto high
profile public companies to ethically source raw materials
both from non-conflict countries and from more
environmentally responsible mines which has widened the
window of opportunity for new mines in other areas of the world
such as Canada, Africa and Australia.
Supply chain transparency and responsibility, particularly
for larger companies, are long term, intensifying trends
and with the Gigafactory, Tesla is front and centre
IM Data has
released a FREE report on how the Gigafactory will
affect the demand for critical minerals, graphite,
lithium and cobalt.
your copy click on the report or visit data.indmin.com/tesla