Miner and commodities trader
Glencore (LON: GLEN) has signed
a five-year deal to supply South Korean battery manufacturer Samsung SDI
with up to 21,000 tonnes of cobalt amid an expected boom in demand for the
metal.
The agreement will see the Swiss firm
send the equivalent to 45% of its 2019 cobalt production, or about 62% of its
expected total output for 2020 to Samsung.
Glencore produced 46,300 tonnes of
cobalt last year, up 10% from 2018, but expects to generate only about 29,000
tonnes this year after shutting down its Democratic Republic of Congo’s Mutanda
mine, the world’s largest cobalt operation, last year.
The supply going to the battery
maker will come mainly from the company’s Katanga mine, also in the DRC.
“The deal demonstrates a further
continuation of Glencore’s cobalt hydroxide marketing strategy to secure
long-term supply agreements with key players in the lithium-ion battery supply
chain,” Nico Paraskevas, Glencore’s head of copper and cobalt marketing said in
the statement.
The Baar, Switzerland-based firm signed a number of multi-year deals cobalt
supply last year. In April, it committed to provide German luxury vehicle maker
BMW with cobalt from its Murrin mine in Australia.
Glencore also signed three other
large, long term deals in 2019, with Korean battery manufacturer SK Innovation
for 30,000 tonnes (enough to make 2m EVs with today’s cathode technology),
Belgian chemicals giant Umicore and China’s
GEM, a battery recycler.
Last month, Bloomberg reported that
Tesla was in talks
to buy cobalt from Glencore for its third gigafactory, recently opened
in Shanghai.
Along with the closure of Mutanda, these
news have created a sense that the cobalt market will fall further into balance
in 2020, helped by increasing demand from the battery and electric vehicle
sectors.
Some cobalt sourced in Congo, which
accounts for about 60% of global supply, has come under scrutiny for its
potential use of children in mining.
Tesla, Google and Apple were among
the big names sued by a human rights group in December about their alleged involvement
in abusive mining practices in Congo.
According to Amnesty International, children as young as seven have been
found scavenging for rocks containing cobalt in the DRC. The group also claims
to have evidence that the cobalt those miners dig has been entering the supply
chains of some of the world’s biggest brands.
Traditionally, artisanal miners
have sold their ore to local cooperatives, which then sell it to local
merchants and traders. They, in turn, sell to international traders or
operating mines with established transport links and that cobalt ends up being
exported mostly to China.
Those and other allegations have
put pressure on companies and on traders. The London Metal Exchange (LME), the
world’s biggest market for industrial metals, has plans to ban metal tainted by human rights abuses. The
initiative to ensure responsible sourcing originally had 2022 as the
deadline, but LME will now wait until 2025.
The European Union in May 2017 passed a regulation to stop mine workers being abused and conflict minerals being exported to the EU. The requirement to ensure mineral imports are responsibly sourced will become effective on Jan. 1, 2021.
As part of today’s deal with Samsung SDI, Glencore has agreed to have its operations in Congo independently audited each year against the “Cobalt Refinery Supply Chain Due Diligence Standard,” as defined by the Responsible Mining Initiative.