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Vale (VALE) Inks Deal With Northvolt to Supply Nickel Products

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Vale S.A. (VALE - Free Report) recently announced that Vale Canada and lithium-ion cell producer Northvolt AB have entered into a multi-year agreement. According to the deal, Vale will supply low-carbon nickel products to Northvolt AB. This is a strategic milestone for Vale as it progresses on its efforts to capitalize on the surge in electric vehicle demand and builds on both the parties’ endeavors to minimize carbon emissions in the electric vehicle supply chain.

Vale is a leading global producer of low-carbon and high purity nickel products. It is estimated that Vale currently sells 5% of its production into the EV market. It has plans to increase that to 30-40%. The company has earmarked investments between $4 billion and $6 billion by 2030 to cut carbon emissions by 33%. This will serve its goal to attain net-zero emissions by 2050.

Northvolt intends to raise the sustainability bar for battery producers and reduce carbon emissions by up to 90% compared to benchmark batteries today. This will be aided primarily by leveraging clean energy in production and recycling. Northvolt strives to build batteries with minimal CO2 footprint utilizing clean energy and smart technology. This Vale-Northvolt partnership is a result of over two years of negotiation and is expected to be a stepping stone for further collaboration in various areas.

According to a Bloomberg report, Tesla (TSLA - Free Report) has signed a multi-year deal with Vale for the supply of nickel from Canada.

Amid the heightening climate-change concerns, the development of batteries used to power EVs is gaining utmost importance. This, in turn, has fueled the demand for metals utilized in the production of batteries. Riding on this, demand for nickel in batteries is estimated to surge more than 500% over the next decade. Meanwhile, lithium demand is forecast to improve 25-35% per annum over the next decade, with a significant supply-demand deficit expected from the second half of this decade.

Miners like Vale, BHP Group (BHP - Free Report) and Rio Tinto plc (RIO - Free Report) are making efforts to tap this demand. Last year, BHP Group entered into an agreement with Tesla to supply nickel from the Nickel West mine in Australia. In addition to the supply agreement, BHP and Tesla are collaborating on ways to make the battery supply chain more sustainable with a focus on end-to-end raw material traceability using blockchain and technical exchange for battery raw materials production.

Earlier this year, Tesla signed a nickel supply deal in the United States, selecting Talon Metals Corp's Tamarack mine project in Minnesota. The project is a joint venture of Rio Tinto plc and Talon Metals.

Rio Tinto recently completed the buyout of the Rincon lithium project in Argentina for $825 million. It is a large undeveloped lithium brine project located in the heart of the lithium triangle in the Salta Province of Argentina. It will position Rio Tinto well to meet the growth in demand for lithium.

Price Performance

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In the past year, shares of Vale have gained 41.1%, compared with the industry’s rally of 40.2%.

Zacks Rank

Vale and Tesla currently sport a Zacks Rank #1 (Strong Buy). Rio Tinto carries a Zacks Rank #2 (Buy) while BHP has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.