LME WEEK 2016: EV, battery makers look to secure cobalt volumes; scrutinise supply chain

Electric vehicle (EV) manufacturers and their battery suppliers have been increasingly focusing their attention on securing cobalt supplies for future production from miners and traders, according to several sources in the market.

A key theme this year has been a move from electronic to automotive-based demand, one source told Metal Bulletin at LME Week, taking place this week.

Large-scale intermediate enquiries were on everyone’s lips at the start of LME Week, with multiple intermediate enquiries of more than 1,000 tonnes of cobalt contained rumoured to be doing the rounds. Some of these are believed to be closely linked to the EV sector.

EV makers, as well as battery suppliers for this market, are increasingly present further up the supply chain for a number of reasons, sources said during LME Week.

In a market that is expected to tighten in years to come, EV manufacturers and battery makers are showing an interest in locking in prices and volume.

They are also keen to ensure full traceability of supply, sources said.

Artisanal mining in the Democratic Republic of Congo, the world’s biggest cobalt producer, came under scrutiny earlier this year, due to alleged connections with human rights abuses. Consumers of cobalt across the supply chain are closely scrutinising their supply chain, partly as a result.

By buying cobalt from intermediate sources directly, EV and battery companies supplying the EV chain – focusing on being fully ethical in their business structure – have full visibility from the beginning of the supply chain to the end, one source said.

“We understand that there are car companies enquiring directly,” one trader said.

“It’s about traceability of supply,” one producer told Metal Bulletin. “They want predictability and security… Everything is related to EV.”

A consumer source warned, however, that this could result in a misleading view of actual demand. He argued that at present EV makers are likely to be scoping the entire chain. They may be talking directly to mining companies, but also to refiners and battery makers about the same demand. Until deals are signed, it’s difficult to assess actual demand, he argued.

If EV makers were to secure directly from mining companies, they would effectively need to toll their material at refiners, possibly cathode operations, as well as battery operations, meaning multiple negotiations across the chain. If they buy through battery makers, there would still need to be some tolling taking place.

An anticipated EV boom has also led to heightened speculative interest in recent months, and this looks set to continue in the months to come, sources said.

Metal Bulletin assessed high-grade cobalt at $13-13.75 per lb, in-warehouse, on Friday October 28, up from $12.5-13.3 a month earlier. 
Low-grade cobalt was assessed at $12.7-13.45 per lb, compared with $12.35-13.15 per lb on September 28.