Vale & Tesla Enter Long-Term Supply Deal

Tesla (TSLA) has secured a long-term nickel supply contract with Vale (VALE). Brazil-based Vale is one of the world’s largest mining companies, with operations in more than two dozen countries. In addition to nickel, it also mines iron ore that is processed into steel. Elon Musk-led Tesla makes electric vehicles (EV).

The deal calls for Vale to supply Tesla with low-carbon nickel of the Class 1 type. Nickel is an important material in the manufacture of electric vehicle batteries. The nickel that Vale will deliver to Tesla will come from its Canadian operations.

Vale Gets More Exposure from EV Industry

As the world shifts to EVs to combat climate change, demand for battery materials like nickel is growing. Vale plans to sell 30% to 40% of its Class 1 nickel to the EV industry.

Deshnee Naidoo, Vale’s Executive Vice President of Base Metals, said, “We are pleased to have the leading electric vehicle manufacturer Tesla among our customers…This agreement reflects a shared commitment to sustainability and shows very clearly we are the supplier-of-choice for low-carbon and high purity nickel products essential for long-range batteries.”

For Tesla, the Vale deal goes toward ensuring it has an adequate supply of the important EV battery material. The Vale nickel supply agreement also comes at a time when Musk’s Twitter takeover deal has weighed on Tesla’s stock.

Wall Street’s Take

The stock has a Hold consensus rating based on three Buys, six Holds, and one Sell. The average Vale price forecast of $19.61 implies 24.8% upside potential to current levels.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Vale, with 2.6% of portfolios tracked by TipRanks increasing their exposure to VALE stock over the past 30 days.

Key Takeaway for Investors

The Tesla deal marks a major boost to Vale’s efforts to get more exposure to the fast-growing electric vehicle market.

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