Chinese Lithium Giant Agrees Three-Year Pact to Supply Tesla

China’s top producer of lithium, a metal used in electric-vehicle batteries, said it’s agreed a deal with Tesla Inc. to supply a fifth of its production to the vehicle maker, highlighting the push for supply pacts.

Tesla will designate its battery suppliers to buy lithium-hydroxide products from Ganfeng Lithium Co. and its unit, the Jiangxi-based company said in a filing to the Shenzhen exchange on Friday. The agreement runs from 2018 to 2020 and could be extended by three years, Ganfeng said. Its shares jumped.

Electric-vehicle producers including Elon Musk’s Tesla are pushing to secure supplies of lithium for batteries as investors and mining companies gauge the potential for growth in the industry. Still, the burgeoning market has been roiled in 2018 by price declines, and forecasts from some banks that a wave of new mining projects will outpace demand growth.

Announcements from Ganfeng on plans for its relationship with Tesla, as well as battery producer LG Chem Ltd., help signal the quality of its products to potential investors ahead of a planned initial public offering in Hong Kong, Nomura Holdings Inc. analyst Jamie Wang said in an email.

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