Western carmakers have yet to wake up to the limited supply of cobalt and risk being left behind by their Chinese rivals, according to the chief executive of the world’s biggest producer of the battery metal.
The warning by Ivan Glasenberg, chief executive of Glencore, will increase the pressure on carmakers such as Volkswagen and BMW, which have pledged to spend billions rolling out new electric car fleets.
Both carmakers have said they are looking to sign long-term supply agreements for cobalt, a critical battery metal that is abundant in the Democratic Republic of Congo, one of the poorest countries in the world.
“The motor car industry hasn’t woken up to the fact, I don’t think, how important cobalt is and how ‘tight’ cobalt is,” Mr Glasenberg told the FT Commodities Global Summit in Lausanne.
Over 60 per cent of the world’s cobalt comes from the DRC, where it is mined by Glencore, China Molybdenum and some other smaller operators. Switzerland-based Glencore aims to increase its production of cobalt from the country by more than 67 per cent over the next three years.
But worries over this availability have increased after Glencore signed an agreement with a Chinese battery materials maker this year to supply around a third of its cobalt production over the next three years.
“The Chinese will have most of the offtake of cobalt. They’re not going to sell batteries to the world, more than likely they’ll produce batteries in China and sell electric vehicles to the world,” Mr Glasenberg told the conference.
Cobalt prices have more than doubled over the past year to their highest level since 2008 because of rising demand from electric carmakers. About 10 kilogrammes of cobalt is used in an electric car battery, more than 1,000 times the amount used in an iPhone, according to BMO Capital Markets.
Glencore is facing a fivefold rise in the royalty it has to pay to the DRC government on cobalt under a mining code signed this month by president Joseph Kabila.
Glencore would have no qualms about selling its copper and cobalt assets to a Chinese buyer if they offer a high enough price, said Mr Glasenberg. The company has invested $7bn in the resource-rich country based on the provisions in the 2002 mining code, said Mr Glasenberg.
“They may come with a number that blows the lights out. If we get that number I’ve got to look after shareholders. I’m not here to look after the world politics, so we would sell it, yes,” he said.
Mr Glasenberg also said the global copper market could face a supply “crunch” over the next few years as there are no new mines being built.
“There’s not much new tonnes if you add it up. There’s no new big tonnes coming on the market,” he said. “Provided demand is there and China doesn’t crack . . . we could have a crunch.”
Speaking on another of Glencore’s key commodities, coal, Mr Glasenberg said developing countries in south-east Asia will continue to use the fuel as a power source. Glencore agreed to buy Rio Tinto’s Hail Creek coal mine in Australia for $1.7bn Tuesday.
“They are building a lot more coal-fired stations, these are the cheapest form of energy production in the world,” said Mr Glasenberg. “Poorer impoverished nations have no alternatives, they are going to burn coal.”
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