Glencore to Double Cobalt Output on Electric Vehicle DemandBy
Swiss trader could control about 40% of world market by 2019
Glencore in discussions with Apple, Tesla and VW, CEO says
Glencore Plc will double its production of cobalt in the next two years, tightening its grip on the market for the key battery component of electric vehicles.
The Swiss commodity giant’s Toronto-listed Katanga Mining Ltd. in the Democratic Republic of Congo will produce as much as 34,000 tons in 2019, Katanga said Monday. That compares with the 20,000 tons-a-year guidance Chief Executive Officer Ivan Glasenberg gave in August and could give Glencore control of about 40 percent of world supplies, according to current data.
Glencore, which mines products from coal to zinc and trades some 100 raw materials, is zeroing in on cobalt after prices more than doubled this year on demand from automobile and battery manufacturers.
The trader has already held discussions with Volkswagen AG, Tesla Inc., Apple Inc. and various battery makers about signing supply contracts, Glasenberg said Tuesday. “There’s a lot customers who want to lock in supply,” he said on an investor call.
The company’s Mutanda Mining, also in the Congo, was the largest producer of the metal last year, shipping 24,500 tons out of a worldwide market of about 109,500 tons, according to cobalt trader Darton Commodities Ltd. The boost in output at Katanga will make the mine comfortably the world’s biggest. It will ship 11,000 tons next year, according to Monday’s statement, and should add $800 million to Glencore’s mining revenue, based on Bloomberg calculations at current spot prices.
Congo, source of 60 percent of world cobalt supply, aims to take a larger share of earnings from the metal by increasing taxes. Lawmakers in the central African country last week approved new mining legislation that would increase royalties to 3.5 percent from 2 percent and introduce a profit windfall tax.
Glencore and other miners have opposed the changes, which they say will drive away investment. The new code won’t affect current operations as the existing legislation protects contractual terms for at least 10 years from the date of any change, the companies said Dec. 11 in a joint statement.
Still, even with increased supply from Glencore’s mines, there will not be enough cobalt to deliver the number of electric vehicles needed and new battery technology using less or no cobalt will be required, Glasenberg said.
Glencore estimates that at least 314,000 tons of additional cobalt production would be required to make 30 percent of new vehicles electric by 2030.
“The world will have to find a better solution,” he said.
Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.