OEMs urged to engage more with metal supply chains

Original equipment manufacturers (OEMs) should engage more closely with their nonferrous metal supply chains in order to help assess vulnerabilities and sustain healthy regional manufacturing hubs in future years, according to attendees at this week's EIT Summit in Berlin.

Philippe Varin, head of the French governmental mission on raw materials, called on OEMs to work with their suppliers to conduct systematic reviews of their supply chains, across Tiers 1-4. He noted that supply of numerous metals — including titanium, germanium and palladium — is an ongoing concern, in part due to "huge" logistics disruptions, but it is too soon to draw firm conclusions without more clarity.

Many of those suppliers of OEMs are in a tough position, currently squeezed by high raw material costs and multiple other inflationary pressures, but with customers that are reluctant to significantly revise traditional contracts to reflect the structurally higher cost curve, lamented several attendees on the sidelines of the conference.

Some go further, with Martin Philips — Talga's chief executive for Europe and chief operating officer — urging OEMs to "become miners", adding that it is in OEMs' best interest that new mining projects move forward so they can secure enough battery raw materials in the future. Unless OEMs start investing and entering into the mining space, Europe may struggle to reduce its reliance on imports for battery materials, Philips warned.

Earlier this year, US-based automaker Tesla's chief executive, Elon Musk, said the company may need to enter into lithium mining and refining in light of the surge in lithium prices, with lithium carbonate currently at $60.50/kg cif China, up from $13/kg a year ago. But so far no firm steps have been taken.

Speaking on the sidelines of last week's Cobalt Institute conference in Zurich, a European automaker said it is willing to invest in the upstream supply chain as far as mining, but indicated a lack of understanding about the duration of time it takes for mines to get permitted, constructed and start commercial production.

Some shifts in behaviour are emerging from the aerospace industry — albeit not on a large scale yet — with one OEM recently seen taking steps to strengthen its dialogue and relationships up the metal supply chain.

And elsewhere, market participants note other recent changes in how some buyers are approaching issues, conscious of the need to sustain healthy regional supply chains where they already exist, such as support from some parts of the aluminium industry for the extension of EU anti-dumping duties on imports of Chinese silicon.

Chinese export prices for 5-5-3-grade silicon are currently at $2,500-2,550/t fob, compared with $4,200-4,400/t ddp Europe works.

By Ellie Saklatvala