Germany's BMW signs five-year cobalt supply deal
Published date:10 July 2020
German carmaker BMW has signed a five year cobalt supply agreement with Moroccan producer Managem in a deal worth €100mn ($113mn), a move that promises to have significant implications for broken cathode availability.
The deal is another major endorsement for cobalt in the battery chain after Tesla's recent supply deal with Glencore. The BMW agreement will run from 2020-25 and provide one fifth of BMW's cobalt requirements for the period. Managem is the owner of Compagnie de Tifnout Tiranimine (CTT), which produces chemical grade broken cathode metal using feed from its mine in Morocco. CTT is the only active producer of broken cathode in the world after the Chambishi refinery in Zambia closed last year. It produces around 1,800t of cobalt metal each year.
"Cobalt is an important raw material for electromobility. By signing this supply contract with Managem today, we are continuing to secure our raw material needs for battery cells," said Andreas Wendt, BMW AG board member for the purchasing and supplier network. "By 2023, we aim to have 25 electrified models in our line-up — more than half of them fully electric. Our need for raw materials will increase in line with this. For cobalt alone, we expect our needs to roughly triple by 2025."
BMW's electric vehicle sales were up by 3.4pc year on year at 61,652 in the first half of 2020, in contrast to a 23pc drop in its overall vehicle sales over the period.
The company will source the other 80pc of its cobalt supply from Australia, snubbing the world's largest supplier by country the Democratic Republic of the Congo (DRC). There are ongoing concerns in the industry about sourcing from the DRC, but producers in the region have signed agreements with carmakers. Glencore entered an arrangement with Tesla in June for cobalt from the DRC.
"For us, ethically responsible raw material extraction and processing starts at the very beginning of the value chain: We take a keen interest in battery cell supply chains that extends all the way down into the mines themselves," said Ralf Hattler, senior vice-president purchasing at BMW.
The agreement with Managem is likely to impact prices for chemical grade cobalt metal, which are at parity with alloy grade metal prices for the first time since June 2019. Falling demand from the aerospace industry has weighed on alloy grade metal prices, while tight availability of broken cathode and briquettes after the closure of Chambishi and the Ambatovy project in Madagascar has supported chemical grade metal prices.
Arguslast assessed prices for both alloy grade and chemical grade cobalt metal at $13.80-14.50/lb duty unpaid in Rotterdam on 9 July.
By Thomas Kavanagh
