German luxury vehicle maker BMW this week signed a $2.3 billion long-term deal with Swedish battery maker Northvolt, the latest of such deals, as European carmakers try to compete with Tesla in the burgeoning electric vehicle market.
Tesla’s gigafactories and battery technology have long given it an edge in the EV market (Northvolt was started by two former Tesla execs), but when it comes to the sourcing of raw material for lithium ion batteries, the California company faces the same challenges as traditional carmakers.
The Munich-based carmaker signed a five-year cobalt supply deal with Moroccan miner Managem worth some $112m. Managem owns Bou-Azzer in the Anti Atlas mountains, the only primary cobalt mine in the world, in operation since 1930.
BMW says the offtake agreement, first announced a year ago, covers roughly one-fifth of its requirements for the NCM (nickel-cobalt-manganese) cathodes in its batteries, which together with Tesla’s NCA (nickel-cobalt-aluminum) represents more than 90% of the market.
The other 80% of the cobalt it needs comes from the Murrin Murrin mine in Australia, a Glencore owned operation, and makes BMW the only carmaker with a direct to mine raw material sourcing approach.
Roskill, a metals, minerals and chemical industry research company, estimates approximately 19.6kt cobalt will be required and provided for by the two sole suppliers between 2020-2025.
For Managem and Glencore to provide 100% of BMW’s cobalt requirements, approximately 85% of each company’s respective mine production would need to be assigned to BMW, totalling around 1.5ktpy and 2.4ktpy from Managem and the Swiss giant respectively.
Roskill says these volumes are significantly higher than previous estimates and may also imply an agreed long-term cobalt metal price at a discount to current market levels.
Annual cobalt production is only around 130,000 tonnes, mostly as a byproduct of nickel and copper mining.
Some two-thirds of supply comes from the Democratic Republic of the Congo. That proportion may rise as production from the country has largely escaped the effects of covid-19 with workers confined to mine sites (the virus closed another major supplier – the Ambatovy mine in Madagascar).
In the DRC fears about political instability, the challenges of ethical sourcing and the presence of thousands of artisanal miners combine to supercharge supply concerns.
More than 80% of the chemical processing and refining capacity of cobalt is located in China, which after Glencore, is also the largest cobalt miner inside the DRC.
Although the Tesla deal is relatively small and remains unconfirmed (as were previous agreements) it casts doubt on pronouncements from Tesla that it’s close to eliminating cobalt from its batteries altogether and claims that its current generation NCA technology uses much less than even the most thrifted NCM chemistries (8 parts nickel for every one cobalt).
Glencore has already signed another 3 long-term deals, with Korean battery manufacturer SK Innovation for 30,000 tons (enough to manufacture 2 m of electric vehicles with existing cathode technology), Belgian chemical giant Umicore and China’s battery recycler GEM.
Benchmark Mineral Intelligence, a source chain and a battery reporting company, estimates that even without Tesla, more than 90% of Glencore’s cobalt production in the Democratic Republic of Congo is blocked in long-term deals.
A proposal through a New York charity, the Sisters of the Good Shepherd, to be voted on at Tesla’s annual shareholders’ meeting, scheduled for July 7, but postponed due to covid-19, for an investigation into Tesla’s cobalt supply.
A representative of the Sisters told S-P Global Market Intelligence that a Tesla-Glencore agreement “appears to be inconsistent with its message related to the relief of the use of cobalt, and what we need to see is a more powerful implementation of human rights.”
Roskill says that while BMW now has agreements to meet 100 percent of its needs, the company has not hesitated that it is almost to overlook production in the Democratic Republic of The Congo given the amount of cobalt needed in the long run (current production points before the end of the decade).
This is evident in several projects in which BMW Group is a part, such as the Cobalt Responsible Initiative and its Cobalt Development Study in partnership with BASF, Samsung SDI and Samsung Electronics. Its participation in these projects suggests that the automaker potentially wants to acquire more cobalt from the mines of the Democratic Republic of the Congo in the future, is focusing on a long-term strategic technique for sustainability in the region.
Electric autocellulars have recently surpassed cell phones and super-equipment for the aviation industry as the main source of cobalt demand.
Tesla, along with Google, Apple and others, demanded through a human rights organization in December for artisanal cobalt extracted under harmful and unethical conditions, adding the use of child labor, entering their home chains.
The new arrangement is likely to aim to load more opacity into the source chain and hinder efforts to formalize the craft sector
Earlier this year, the Democratic Republic of the Congo announced the creation of the Cobalt General Enterprise (EGC) in which state-owned mining company Gécamines becomes the monopoly of small miners’ cobalt.
EGC is expected to begin within two months, however, Benchmark says that few main points have been revealed and offer greater transparency “especially with regard to how they deserve to trace the curtains and whether independent corporations will be allowed to audit the process. the new arrangement is likely to increase more opacity in the source chain and hinder efforts to formalize the artisanal sector.”
Cobalt remains through the most expensive component of electric vehicle batteries.
After peaking nearly a decade in early 2018 above $100,000 consistent with the ton, the costs of cobalt used in the global chain of battery sources fell by 70%.
Glencore’s resolve to suspend its Mutanda mine in Congo, the world’s largest and largest producer, has brought the market to life, but steel remains stagnant at the beginning of $30,000.
Benchmark’s June cobalt price index shows prices gaining 3.2% month on month to $31,300 a tonne (100% Cu basis), but the London-based price reporting agency warned of demand weakness and receding supply fears as raw material volumes from the DRC shipped via South Africa returns to the market.
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Whether the choice of uranium is thorium; Lithium is cobalt. Even if the thorrio tries to dissolve, there’s no time for the world. Similarly, they want to discover new cobalt fields in the supply/demand balance and want to develop enrichment characteristics. That’s why BMW’s investment is important. Kind regards.