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BHP (ASX:BHP) share price rises after Tesla deal

The BHP Group Ltd (ASX: BHP) share price went up more than 3% after announcing a deal with Tesla Inc (NASDAQ: TSLA).

BHP’s nickel supply agreement with Tesla

The resources giant revealed it’s going to supply Tesla with nickel from its Nickel West asset in Western Australia. BHP said this was one of the most sustainable and lowest cost carbon emission nickel producers in the world.

Nickel is an important metal that is used to manufacture Tesla’s battery technology for both its electric vehicles and battery storage systems.

In addition to this agreement, the two businesses will work together to make the battery supply chain more sustainable. There will be a focus on being able to trace raw materials throughout the supply chain via blockchain. The two partners will work on promoting the importance of sustainability in the resources sector, including finding partners who are very aligned with BHP’s and Tesla’s principles and battery value chains.

BHP also said that it’s going to work with Tesla on energy storage solutions that will help lower carbon emissions in operations with increased usage of renewable energy combined with battery storage.

Management comments

According to BHP, demand for nickel in batteries is going to grow by over 500% over the next 10 years. A large part of this will be supporting the world’s rising demand for electric vehicles.

BHP Minerals Australia President Edgar Basto then said: “BHP produces some of the lowest carbon intensity nickel in the world, and we are on the pathway to net zero at our operations. Sustainable, reliable production of quality nickel will be essential to meeting demand from sustainable energy producers like Tesla Inc.

“The investments we have made in our assets and our pursuit of commodities like nickel will help support global decarbonisation and position us to generate long-term value for our business.”

Summary thoughts on BHP and the share price

The market seemed to think this was a pretty decent deal considering BHP shares rose 3%. However, I’m not sure how important for BHP’s earnings it is considering nickel is (for now) a small component of the overall BHP business.

Iron ore is the key driver of profit at the moment. And China keeps buying lots of it. But I wouldn’t expect the iron ore price to stay this high forever, so I’m happy to hold off. But it’s good to see BHP linking up with one of the fast-growing and forward-thinking businesses of the world.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.

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