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(Reuters) - Volkswagen (DE:VOWG_p) Group China said on Monday it will form joint ventures with Huayou Cobalt and Tsingshan Group to secure nickel and cobalt supplies, in a bid to control battery costs at a time of surging raw material prices.
The three companies have signed a memorandum of understanding for two joint ventures, the first between the three firms in Indonesia, where they will jointly invest their respective advantages and resources for battery raw materials production, Volkswagen said in a statement.
More than 10% of the world's laterite nickel ore reserves are in Indonesia, the German carmaker added.
Global nickel prices have surged almost 400% this year, after Moscow's invasion of Ukraine and the West's moves to sanction Russia, a key major supplier, heated up an already bullish market.
Prices on the London Metal Exchange got a further boost on March 8 when they doubled to $100,000 per tonne in a matter of hours, after Tsingshan bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls.
Prices have dropped sharply since then however after the LME was forced to halt trading for a period and reopened with new trading limits.
Privately owned Tsingshan has become the world's top nickel producer, thanks to its development of a low-cost process to make the metal.
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It already has major investments in Indonesia, including other joint ventures with Huayou.
Volkswagen's second joint venture will be formed with Huayou in China's southwestern Guangxi region for the refining of nickel and cobalt sulfates, precursor and cathode material production, it said.
"The cooperation aims to achieve significant cost advantages, secure the raw material supply and achieve a transparent and sustainable supply chain," it said.
"The two partnerships target to contribute to the Group’s long term target of a 30-50% cost reduction on each battery."
