@PASBOZ this supports your long held theory of interaction with...

@PASBOZ this supports your long held theory of interaction with Glencore

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Automotive, cobalt: Tesla signs offtake with Glencore for DRC cobalt

• Published on June 23, 2020

Jake Fraser
Senior Consultant
4 articles Follow

Tesla has struck a deal with Glencore, the world’s leading cobalt producer, for the procurement of cobalt to be used in Li-ion batteries for its range of electric vehicles. Reports of the two powerhouses being in discussions first surfaced in January 2020, though no details were initially disclosed. The deal is reported to serve the feedstock requirements of Tesla’s new Shanghai and upcoming Berlin factories.
Since mid-2019, Glencore has been active in securing long-term agreements with downstream Li-ion cathode, cell and OEM customers. This follows the mining giant placing Mutanda, one of the world’s flagship cobalt producing assets, on care and maintenance in 2019. It is clear that Glencore has placed a strategic focus on forward selling its built-up hydroxide stocks, as well as future production from Katanga in the DRC and cobalt metal from Murrin Murrin in Australia (destined for BMW).

Note: All figures expressed in terms of contained cobalt
The signing of supply contracts with major electric vehicle/Li-ion players, highlights how supply security has a premium for their respective production growth requirements, versus the alternative ‘hand-to-mouth’ procurement approach. In addition, the forward sales from Katanga, in conjunction with having Mutanda on care and maintenance, significantly reduces the volumes of cobalt available in the open market, potentially further incentivising security of supply for others in future.
Assuming Umicore’s offtake is associated with Katanga and is approximately 5ktpy cobalt contained in hydroxide, Glencore’s committed production from the asset totals 24.5ktpy cobalt in contained hydroxide. With a nameplate capacity of 30ktpy containted cobalt, this equates to 82% of production already being locked up; noting Katanga produced 17.1ktpy cobalt contained in hydroxide during its ramp-up phase in 2019.
Furthermore, the direct mine sourcing method and exposure to ESG concerns within the DRC does not end with Tesla, but also extends to its associated suppliers. Thus, the precedence of Tesla establishing such a deal may have required consultation with its cell and cathode providers which use cobalt (e.g. LG Chem and Panasonic). This highlights the growing requirement for the alignment of sustainability frameworks and practices, and a willingness to share risk, between the inter-connected stages of the Li-ion supply-chain. It also highlights that sourcing material from the DRC is largely inescapable where cobalt is concerned.
With other large OEMs yet to make commitments upstream to the mine source as part of their procurement efforts (at least publicly), it is likely only a matter of time before direct sourcing methods become the norm. More deals of this type are expected to occur in future as OEMs and cell providers seek to assure control of their respective supply-chains, though the mechanics behind establishing such relationships, with regards to sustainability, will be a key space to watch.
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Jake Fraser
Senior Consultant
Published • 8h
4 articlesFollow
Tesla has signed an offtake agreement for the supply of hashtag#cobalt units with the world’s largest producer Glencore. This follows a string of offtake agreements Glencore has secured with Li-ion hashtag#supplychain participants, which are predominantly aligned to its hashtag#DRC producing asset in Katanga. More importantly, the deal may provide an indication of the growing incentive for OEM’s to transition their raw material procurement approaches toward a ‘direct sourcing method’. Although this method shifts the responsibility of raw material sourcing from downstream contracted suppliers to the OEM’s themselves, it does require the sharing of hashtag#risk surrounding hashtag#ESG and responsible sourcing initiatives – a key dynamic to watch evolve over the coming decade. Roskill SK innovation BMW Group Samsung SDI Umicore GEM hashtag#electricvehicles hashtag#batteries hashtag#lithiumion hashtag#batterymetals hashtag#sustainability hashtag#China hashtag#USA

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