FEATURE: Glencore adding long-term deals in cobalt sales
Source: Mysteel
Dec 09, 2019 17:30
SK Innovation, a major producer of lithium-ion batteries in the world, anticipates the EV battery market to grow to about $150 billion by 2025, or being larger than the semiconductor market, and the global demand for cobalt in EV batteries to grow to 32,000 tonnes in 2020 and 92,000 tonnes in 2025.
According to Glencore, the cobalt demand in 2018 was around 120,000 tonnes, and at least 73,000 tonnes of cobalt demand will be added from the new EV sector by 2025.
With the deal, SK Innovation has “secured supply of a metal which is both core to battery production and in short supply. SK Innovation stands ready to produce the batteries required to meet the significant anticipated battery demand,” SK Innovation commented in a release about the pact with Glencore.
Source: BYD’s website
Glencore actively seeking long-term cobalt business partners
Glencore has been actively securing long-term supply deals for its DRC cobalt supplies, and on October 7, it signed a five-year supply deal with the Chinese battery material manufacturer GEM Co. for at least 61,200 tonnes of cobalt hydroxide in pure metal over 2020-2024, as Mysteel Global reported.
Earlier in 2019, it also signed a long-term revolving agreement with the Belgian materials technology and recycling group Umicore for the supply of cobalt hydroxide as the latter has been expanding its global battery materials value chain, Mysteel Global noted.
Glencore will have sufficient output for its long-term contracts in the coming years with the cobalt production from the Katanga mine, its other cobalt-copper mine in DRC despite the recent suspension of operations at its Mutanda copper-cobalt mine in South DRC this quarter because of market conditions and cost effectiveness.
Glencore set its base cobalt production guidance at around 43,000 tonnes for 2019, 29,000 tonnes in 2020 and 32,000 tonnes in 2021, all in pure metal, taking into the consideration of the Mutanda suspension as well as the targeted steady cobalt capacity of 30,000 tonnes/y towards the end of 2020 at Katanga mine, according to Glencore’s latest update to its investors.
Over the first nine months of 2019, Mutanda produced 20,600 tonnes of cobalt metal, up 7% on year, which was nearly 60% of Glencore’s total cobalt output, according to Glencore’s third quarter production report.
Long-term supply deal needed with EV yet to fly
Long-term supply deal may be mutually beneficial to those in the cobalt value chain, as EV market, though, with potential, has not been booming in the past couple of years as expected, Mysteel Global notes.
“With many countries being more conscious of green economy, EVs does have a bright future in the next five to ten years, but multiple factors such as cost effectiveness and convenience have hindered it from growing as fast as expected especially in Asia,” a Singapore-based nonferrous analyst commented at a recent industrial event.
As a result, cobalt price has experienced serious volatility in the past few years, and Mysteel’s 99.98% cobalt price in Shanghai, for example, hit a peak of Yuan 669,500/tonne ($95,034/t) including the 16% VAT over April 2-13 2018 but then slumped to Yuan 217,000/tonne over July 25-29 2019, and as of December 9, the price was assessed at Yuan 268,000/t. The last two prices were with the 13% VAT.
As for new energy vehicles (NEVs) in China including both electric cars and hybrid models, it has not been developing as expected either due to logistics, the limitation in technology and the country’s reduction in subsidies.
China’s NEVs production and sales experienced the year-on-year decline for the fourth consecutive month in October, and over January-October, China’s NEVs production grew 11.7% on year to 983,000 units and sales up 10.1% on year to 947,000 units, but both the growth paces slipped further from those in the first nine months of 2019, as Mysteel Global reported.
For 2019, Beijing had targeted to produce 2 million units of NEVs, which seems hard to achieve, Mysteel Global notes.
Written by Victoria Zou, zyongjia@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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