Volkswagen Group China will form joint ventures (jv) with Huayou Cobalt and Tsingshan Group to secure nickel and cobalt supplies.
The proposed JVs is Volkswagen’s shot at controlling battery costs at a time of surging raw material prices.
The three companies have signed memorandum of understandings for two joint ventures.
The three firms in will jointly invest their respective advantages and resources for battery raw materials production in Indonesia.
More than 10% of the world’s laterite nickel ore reserves are in Indonesia.
Global nickel prices have surged almost 400% this year, after Moscow’s invasion of Ukraine and the West’s moves to sanction Russia, a key major supplier, heated up an already bullish market.
Prices on the London Metal Exchange got a further boost on March 8 when they doubled to $100,000 per tonne in a matter of hours, after Tsingshan bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls.
Privately owned Tsingshan has become the world’s top nickel producer, thanks to its development of a low-cost process to make the metal.
Volkswagen’s second joint venture will be formed with Huayou in China’s southwestern Guangxi region for the refining of nickel and cobalt sulfates, precursor and cathode material production.