By Melanie Burton

MELBOURNE (Reuters) – New Caledonia’s Prony Ressources announced on Wednesday that Tesla Inc (NASDAQ:) had purchased more than 42,000 tons of nickel as part of a multi-year contract. The deal is expected to position it as a leading supplier of the metal for the U.S.-based electric car manufacturer.

Prony bought the French nickel operation from Brazil’s Vale SA. (NYSE:). This year it stated that they aim to produce 44,000 tonnes by 2024. That is twice the expected output in 2021. Prony will make cost-cutting and clean up the waste at its nickel plant.

Electric car makers consider securing adequate supplies of nickel, a critical ingredient in automobile batteries, a priority. Therefore they are keen to find sustainable and low carbon nickel supplies.

Tesla also serves Prony as an adviser in product and sustainability issues. In Australia, it signed earlier this year a contract to purchase supply from BHP nickel operations.

Prony didn’t disclose the length of the agreement with Tesla.

Automaker are expected to use around 30,000 tonnes nickel in its batteries this year, and will likely increase their nickel intake in the future, according to Steven Brown, an independent expert on lithium minerals based in Sydney.

Prony believes the nickel market will recover to surplus four years after 2022, partially because Indonesia tops producer is expected to boost supply, even though it’s a heavy emitter. It stated that by 2026, the demand for nickel in the battery industry should outstrip supply.

Prony, however, has started a price risk management program and locked prices at $20,000 per tonne or less for its 5,000-tonne hedging program.

LME nickel prices are up around 20% and currently trade at $19 100 per tonne.

Prony has 51% of New Caledonia’s provincial governments and other local interests. Trafigura is a global energy trader with a 19% share. Prony Resources Management and Agio Global hold the remaining 9%.