Glencore and Samsung sign five-year cobalt partnership

Glencore Mutanda copper cobalt mine
Glencore has secured a deal to supply cobalt hydroxide from its Congolese mining operations for Samsung SDI’s lithium-ion batteries.

Swiss mining giant Glencore has inked a five-year deal with Samsung SDI to supply cobalt hydroxide for the South Korean manufacturer’s lithium-ion batteries.

This latest agreement follows several multi-year supply deals secured by the miner last year amid forecasts of a cobalt sector revival, although analysts have recently predicted subdued demand in China will cap prices in the short-term.

Under the supply contract, Glencore will provide up to 21,000 tonnes of cobalt contained in hydroxide between 2020 and 2024, with the metal expected to be sourced from its Katanga operation in the Democratic Republic of Congo.

Glencore head of copper and cobalt marketing Nico Paraskevas said this extension of a partnership with Samsung “demonstrates a further continuation of Glencore’s cobalt hydroxide marketing strategy to secure long-term supply agreements with key players in the lithium-ion battery supply chain”.

“This also illustrates Glencore’s important role in supplying the materials that enable the energy and mobility transition and Glencore’s commitment to responsible production,” he said.

Interest in Glencore’s cobalt

In addition to Samsung, Glencore has recently inked supply deals with Korean battery manufacturer SK Innovation, Belgian chemicals giant Umicore, Chinese battery recycler GEM and German luxury vehicle manufacturer BMW.

Media reports last month also allege electric vehicle company Tesla is in talks to buy cobalt from Glencore for its new factory in Shanghai.

According to Bloomberg, unnamed sources said executives from both companies negotiated terms of a long-term contract before an official ceremony to mark the first sales from the Shanghai plant in early January.

No final agreement has been announced as yet.

Cobalt production and pricing

In August, Glencore announced its other DRC-based cobalt mine, Mutanda, would be placed on care and maintenance due to falling cobalt prices and rising costs and taxes, taking an estimated 25,000 tonnes off the market.

This prompted the price of cobalt to quickly rise to a high of $37,000 per tonne in late September. Although still far from the $94,000/t prices of early 2018, it managed to create a sense that the cobalt market will come into balance in 2020, aided by increasing demand from the battery and EV sectors.

Glencore produced 46,300t of cobalt in 2019 and while it lifted production at its Katanga mine to offset supply losses from Mutanda, the miner only expects to produce about 29,000t of cobalt in 2020.

In early February, traders pushed the price of cobalt up almost 10% to nearly $35,000/t since the start of January, but the spread of the coronavirus in China saw factories stay shut over the Lunar New Year holiday, curbing demand for cobalt chemicals.

CRU Group analyst Daniel Chen told Reuters that demand would be hit in the short-term, putting pressure on prices, while large stocks of the raw material in Africa could also weigh on prices.

The cobalt price is currently down almost 1% for the week at $33,500/t.

Meanwhile, Benchmark Minerals analyst Caspar Rawles told the news wire that cobalt demand in China and prices are expected to pick up once the virus is under control, but said there are limits to what Chinese consumers will pay.

However, China’s electric vehicle subsidies are expected to help demand, he said.

The ethics of cobalt mining

The mining of cobalt has been heavily scrutinised due to its connection with child labour practices in the DRC, which accounts for about 60% of global supply.

In December, Tesla, Apple, Google, Dell and Microsoft were all named as defendants in a US lawsuit filed by an international human rights group, which accuses the companies of aiding and abetting in the death and serious injury of children allegedly working in cobalt mines.

Glencore commented on the lawsuit, which was unrelated to the company’s operations, stating: “We offer our condolences and sympathy to the families and the children injured or killed as a result of artisanal mining activities.”

“We do not tolerate any form of child, forced, or compulsory labour in our supply chain,” it said, also asserting it does not purchase, process or trade any artisanally-mined cobalt or copper.

According to Glencore, both it and Samsung are committed to ensuring the ethical and responsible production and procurement of cobalt.

The partners have agreed that the DRC operations will be independently audited each year against the ‘Cobalt Refinery Supply Chain Due Diligence Standard’, a standard defined by the Responsible Mining Initiative.

Join Small Caps News

Get notified of the latest news, events and stock alerts