Automakers are the new players in the race to control metals

Henry Ford was right all along, it turns out.

After decades of honing just-in-time global supply networks, car companies are going back to Ford's founding principle of self-sufficiency.

Ford's iconic River Rouge complex in Dearborn, Mich., made its own iron and steel, supplied by company freighters from its own iron ore and coking coal mines in Michigan and Kentucky.

World War I had created material shortages and disrupted logistics. Ford's answer was to take full ownership of the automotive supply chain from mine to product.

Auto companies are facing the same problems today, compounded by the need to go electric, which means creating totally new metallic supply chains.

While Ford worried about iron ore and rubber, his successors are battling supply crunches and soaring prices in key battery inputs such as lithium, nickel and cobalt.

If "insane" lithium prices persist, tweeted Tesla CEO Elon Musk, the company "might have to get into the mining and refining directly at scale."

Musk is not the only automotive executive thinking about minerals self-sufficiency.

Ford Motors CEO Jim Farley, said recently, "The most important thing is we vertically integrate." The company intends to take control of its supply chains "all the way back to the mines."

The problem facing every automotive company is the surge in the cost of lithium-ion batteries, which has forced many, including Tesla, to raise electric vehicle (EV) prices.

Battery-pack costs had previously been on a long-term downtrend riding on the back of incremental technical improvements. The sudden turnaround in EV pricing threatens the collective goal of reaching price parity with internal combustion engines.

Runaway battery metal prices are to blame.

Battery-makers have responded by using more lithium-iron-phosphate chemistry, which doesn't use either cobalt or nickel, but that has only served to tighten up the lithium market itself with spot prices doubling since the start of the year.

Metals accounted for 40% of battery costs in 2015, a ratio that has risen to 80% this year, according to consultancy Benchmark Minerals.

Prices may lose some of their recent heat but there are few who expect a full return to previous lower trading ranges.

That's a big headache for every automaker. But for some it may prove existential.