Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Vintage 1970 Volkswagen Beetle sourced on Flickr by Vinylone, via Creative Commons license.
In one of the clearest signs of a tight cobalt market, Volkswagen has failed to secure a long-term supply of cobalt used in electrical vehicle batteries.
The German carmaker last month put out a tender seeking a five-year supply of the strategic metal at a fixed price. But people familiar with the deal said the offer was well below market prices. Cobalt has more than doubled in price from a year ago, when it was trading around $12 a pound, to its current $27.10 a pound as of last Thursday. (see chart below).
“They’re being arrogant because they’re automotive and they’re used to doing it,” said a cobalt trader quoted Sunday in the Financial Times. “They completely misjudged the contents of the tender. There’s no point negotiating – it’s not even a discussion point.”
Over 60 percent of cobalt is mined in the Democratic Republic of the Congo – raising concerns about stability of supply. The big producers are Glencore (LON:GLEN) and China Molybdenum, along with thousands of artisinal miners who mine the metal and send it to China. Amnesty International has said the process involves child labour.
According to the FT, the VW tender requires the supply of 80,000 to 130,000 tonnes of cobalt, in a market whose total supply is just over 100,000 tonnes a year.
In July of this year Glencore signed a deal to sell up to 20,000 tonnes of cobalt to Chinese battery maker Contemporary Amperex Technology Co Ltd. (CATL). VW would buy the batteries from CATL, in an effort to lock in supply of the metal used in lithium-ion EV batteries. The same month Chinese-owned Volvo said all its car models launched after 2019 would be electric or hybrid. Tesla and BMW are also said to be looking for cobalt supplies, though no tenders have been issued, the FT said.
2 Comments
hidflect
As China snaps up all the Li and Co plays out there I’ve been worried about where the Europeans and Americans are. They seem incredibly complacent and unless they have some ingenious plan I can’t figure out, they”re going to be going into this burgeoning industry with a serious handicap. BTW, in my experience with Germans and German business, arrogance is the default setting.
Markus Pauels
it seems that Namibia has been forgotten as a large, reliable and transparent supply country of cobalt? Companies such as CLA CELSIUS RESOURCES LIMITED are scrambling to get investors, despite outstanding research and scooping studies. Perhaps low cobalt prices are the reason. If I where a battery or car maker, I would hurry up to get those available contracts in Namibia before China picks them up…..