China has signed a huge deal to secure the lion’s share of global cobalt supply — a core component of electric car batteries.
The deal will see GEM — a $4.6 billion company listed on the Shenzhen stock exchange — purchase 50,000 tonnes of cobalt from mining company Glencore over the next three years.
According to the Financial Times, that’s equal to half of the world’s total cobalt supply in 2017 — and comprises around one third of Glencore’s total production estimates through 2020.
The Glencore deal locks in China’s position as a market leader in the manufacturing of electric car batteries globally — given that it already produces more than 80% of the world’s refined cobalt.
Prices for the metal have doubled over the past two years as electric vehicle manufacturers scramble to secure adequate supplies.
There’s a similar race to lock in supply for lithium — Australia is one of the world’s biggest suppliers — although a recent report by Morgan Stanley said increased global lithium supply will see prices fall by 45% by 2021.
GEM said increasing levels of demand meant the use of recycled cobalt metal in battery production was no longer adequate. The company is the main cobalt supplier to Chinese batter maker CAML, which recently announced that it’s now the largest battery supplier in the world.
The total value of deal was not disclosed, but GEM will receive 13,800 tonnes in year one — increasing to 21,000 in 2020.
The FT reports that more than half of the world’s cobalt supply is mined from the Democratic Republic of Congo (DRC), and Glencore is the world’s biggest producer.
The second largest is China Molybdenum — dual-listed in Hong Kong and Shanghai — which purchased the Tenke Fungurume mine in the DRC for $US2.65 billion in 2016.
Glencore’s cobalt mining capacity in the DRC will increase from in around 40,000 tonnes in 2018 to more than 60,000 tonnes next year.
Around 10 kilograms of cobalt is used in the production of an electric car battery — compared to around 10 grams for an iPhone.