A Tesla car charges at a Tesla Supercharger station in Corte Madera, California on April 26, 2021.

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Shares in mining giant BHP Group rose 3% Thursday morning in Australia after the company announced it would supply nickel to electric car maker Tesla.

In a statement Thursday, BHP said one of its mines in Western Australia, Nickel West, will supply the world’s largest manufacturer of electric vehicles with nickel, a key raw material used in EV batteries.

“Demand for nickel in batteries is estimated to increase by over 500 percent over the next decade, in large part to meet growing global demand for electric vehicles,” said Vandita Pant, BHP’s chief commercial officer.

BHP currently derives most of its revenue from iron ore, which is mainly used for steel production.

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Although there were no details of the deal amount, Tesla announced in June that it would be spending more than $ 1 billion a year on raw materials for batteries from Australia, citing the country’s responsible manufacturing practices, according to Reuters.

BHP claims to be one of the most sustainable nickel producers with the lowest CO2 emissions
World.

EV batteries will certainly be of vital importance, and will especially increase interest in copper and nickel.

Vivek Dhar

Commodities Analyst, Commonwealth Bank of Australia

The mining giant currently supplies 85% of its nickel to global battery material suppliers, according to its website. Construction of a new facility to make nickel sulfate, a material used in the lithium-ion batteries that power electric vehicles, is also almost complete, the website said.

Outlook for nickel

Vivek Dhar, the Commonwealth Bank of Australia’s commodities analyst, told CNBC via email.

“EV batteries will certainly be vital and drive interest in copper and nickel in particular,” he said.

However, Peter O’Connor, metals and mining analyst at Shaw and Partners, was less optimistic about the overall nickel sector in terms of room for new players to increase their market share.

He said the nickel market is still very small, with long-term sales of around $ 40 billion. In addition, there are already other major big players populating the market alongside BHP, such as Vale from Brazil and Norilsk Nickel from Russia, he told CNBC on Thursday.

BHP is listed in Australia, New York and London.

MineLife’s senior resource analyst Gavin Wendt told CNBC earlier this week that he had a 12-month price target of AU $ 60 ($ 44) on BHP, which is currently at AU $ 51.40. His comments came before Tesla’s nickel supply deal was announced.

“BHP’s share price performance has been extremely strong and it outperforms its raw heavyweight Rio Tinto,” he said, referring to another great Australian miner.

In fact, BHP has outperformed the S & P / ASX 200 index by around 14% in the past 12 months – not far from its all-time record high of $ 51.82 reached in May, up around 36%. “He told CNBC via email.