Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Mining and commodities trader Glencore (LON: GLEN) has joined forces with battery material supplier Umicore and other major miners to trace the cobalt they produce and use using blockchain technology.
The group, which includes Eurasian Resources Group (ERG) and China Molybdenum (CMOC) is piloting Re|Source, a solution to track responsibly produced cobalt from mine to electric car.
Tested in real operating conditions, from upstream cobalt production facilities in the Democratic Republic of the Congo (DRC) to downstream electric vehicle production sites, the pilot will run until the end of 2021, with the roll-out of the final solution expected in 2022.
Glencore chief executive, Ivan Glasenberg, noted that while blockchain offers unprecedented ability for tracing commodities in the supply chain, it is not enough on its own.
“It must be part of a wider industry effort to bring improvements to the entire cobalt supply chain,” he said.
Re|Source will be tested in real operating conditions, from mines in the DRC to downstream electric vehicle production sites, and will run until the end of 2021
The mining veteran cited as examples of global schemes underway the Responsible Minerals Initiative (RMI), which seeks to monitor and improve artisanal cobalt mines in the Democratic Republic of Congo (DRC).
He also mentioned the collective use of wider environmental social governance (ESG) standards such as the Cobalt Industry Responsible Assessment Framework (CIRAF), the International Council on Mining and Metals (ICMM) and the Fair Cobalt Alliance (FCA).
Re|Source is the latest effort to use blockchain to improve the transparency of global supply chains, especially in commodities.
Blockchain, the technology behind cryptocurrency Bitcoin, creates a link between the physical and the digital worlds, offering a secure digital ledger of transactions that can’t be tampered with.
A few companies have explored of the use of blockchain in the mining industry in the past two year. World’s No. 1 diamond producer by value De Beers launched its Tracr platform, which allows tracing gemstones throughout the entire value chain — from mine to buyer.
Automaker Ford partnered in 2019 with IBM, South Korean battery maker LG Chem and China’s largest cobalt producer Huayou Cobalt to trace cobalt on a simulated sourcing scenario.
Glencore, the world’s largest cobalt producer, extracts the metal in the DRC, which generates about two-thirds of the world’s supply.
Much of the output is sent to China, where it is processed by multiple companies before reaching batteries makers. In addition, up to 20% of the DRC’s cobalt is mined by hand, often by children with picks and shovels who work in dangerous conditions.
To put those worries to rest, the company says that Re|Source has a direct link with the Battery Passport project of the Global Battery Alliance (GBA), in which ERG, Umicore and Glencore itself are involved as pilot partners.
“We believe this initiative will help increase transparency throughout the value chain,” Sun Ruiwen, CEO of CMOC, said in a separate statement. “A transparent and responsible supply chain, bringing together all stakeholders with this joint effort, will give end users greater confidence in cobalt as a raw material.”
The pilot comes as the European Commission is considering mandatory requirements covering the use of responsibly sourced materials in EV batteries.
By 2030, EU economies need to secure more than 64,000 tonnes of ethically-sourced cobalt beyond existing supply-chain constraints, a volume of metal worth around $3.2 billion at current prices, to fuel the transition to EVs. The run on the metal’s price is prompting mining companies to seek new reserves from Australia to the deep sea.
