SEPTEMBERASIA BUSINESS OUTLOOK9IN THE EV BUSINESS, AUTOMAKERS ARE SHIFTING FROM BEING FULLY RELIANT ON BATTERY MANUFACTURERS TO PURCHASING DIRECTLY FROM MINING COMPANIES, SO THAT STABLE SUPPLIES OF CRITICAL RESOURCES ARE MAINTAINEDlast year, up from around 30 percent in 2012. China generated 65 percent of revenue in 2021, more than double the 30 percent in 2012. The global supply chain around semiconductors is being rerouted in response to Sino-U.S. tensions. When it comes to critical resources such as iron ore and non-ferrous metals, investors are poised to urge BHP in particular to develop a business model that is not overly reliant on Chinese demand.During the Aug. 16 earnings call, Henry predicted that Chinese demand for steel will stagnate by the end of the decade. "As we progress towards the middle of this decade and we are moving into a plateauing phase for [China's] steel production, iron ore demand", said Henry. BHP looks to expand its network of customers to the West as the company embraces nickel. In July, BHP and Ford Motor signed a memorandum of understanding for supply of the metal and deliveries could start as early as 2025. In the EV business, automakers are shifting from being fully reliant on battery manufacturers to purchasing directly from mining companies, so that stable supplies of critical resources are maintained.Last year, BHP entered into similar MOUs with Tesla and Toyota Tsusho, the Toyota Motor group's trading arm. Through these contractual arrangements, BHP will be able to engage with automakers in a flexible manner, facilitating customer development. BHPs closest rivals are the Anglo-Australian player Rio Tinto and Brazil's Vale. However, Rio is a step ahead of BHP in terms of exiting fossil fuels and turning to EV commodities.In 2018, Rio concluded the divestment of its entire coal interests, becoming the first major resource developer to field a fossil fuel-free portfolio. The company moved to invest in large-scale lithium projects in Serbia and Argentina. Another challenge facing BHP is the competition to draw customers posed by Chinese and Indonesian companies, which are strong in terms of scale and cost of nickel production.Tesla disclosed a list of 12 direct suppliers of EV battery materials for 2021. Five Chinese enterprises occupied the roster, indicating the level of confidence in China's supply capabilities. Indonesia, the world's largest producer of nickel, is attracting new EV and battery plants built by Hyundai Motor and other multinationals. Both government and industry are working together to capture foreign direct investment and supply contracts.
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