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Tesla Inc's battery supplier Contemporary Amperex Technology Co Ltd (CATL) has assured reporters that an explosion in its subsidiary Brunp Recycling Technology that took place yesterday and took one life has a limited impact on its operations. The accident took place in Brunp's workshop located in the Chinese province of Hunan and severely injured six people in addition to claiming one life. CATL's statements, reported by Sina Finance, also state that the situation is now under control and that its subsidiary is busy investigating the cause of the fire.

Plant Explosion Expected To Have Small Impact On CATL's Battery Production – But Potential For A Larger Disruption Remains Claims Analyst

The facility at which the accident took place is primarily responsible for producing cathode precursors for Lithium-ion batteries. Electrons move between the anode and the cathode in a battery, and a precursor ensures that the unstable lithium that forms the backbone of a battery due to its unique properties is safely integrated into the cathode.

Brunp's Hunan workshop, located in Ningxiang city, is capable of producing 15,000 tons of precursors per year. This forms roughly 19% of the company's overall annual output capacity of 80,000 tons annually, and a report from ArgusMedia provides a few details on the reason behind the accident, as reported by the company itself.

According to the CATL subsidiary, the reason behind the accident was waste aluminum foil catching fire in its garbage disposal unit. Brunp is responsible for producing the ternary precursor materials by recycling lithium, nickel, manganese and cobalt from waste batteries. Recycling is also a long term goal for Tesla's own in-house battery production plans, according to details revealed by the company's representatives at its Battery Day last year.

While the impact on Brunp's annual output does not appear to be significant, this might change in the future believes an analyst at True Lithium Research. This possibility exists due to a potential request by Chinese authorities requiring the company to reorganize all of its facilities. Naturally, this is only a possibility at the moment and any such request is likely to be preceded by an investigation to determine whether the flow of materials and other aspects in Brunp's plants is similar enough to risk another such accident.

The cloud and flash from the explosion could be seen from miles away in a video uploaded to the Chinese platform Pear Video, with a short report stating that 186 firefighters rushed to the scene in its aftermath. Brunp is China's largest battery recycling company and earned 5 billion Chinese Yuan in revenue and 639 million Yuan in profit in 2019 - with the latter accounting for roughly 14% of CATL's bottom line profit of 4.56 billion Yuan in the same year.

CATL holds roughly 53% of Guangdong Brunp Recycling Technology Co., Ltd's shares, which wholly owns Brunp Recycling Technology. Should the company be required to tinker with its manufacturing facilities, then battery prices are likely to go up - with the entire process adding another supply chain disruption as logistical chains continue to deal with the aftermath of a global pandemic.

The extent of the impact on Tesla's battery supplies from this explosion is uncertain, and unless more information on the matter becomes available, it would be unwise to speculate. After managing to deliver half a million vehicles in 2020 despite a global economic downturn, Wall Street analysts expect Tesla to soar to new highs this year, as the company once famous for its production problems looks forward to generating positive bottom-line profit for shareholders consistently.