From the Wall Street Journal, Feb 11:
Companies from China now dominate the
lithium-ion battery production process, which starts in Congo and ends
up in a phone or electric car. Says one executive: ‘We’re realizing that
the Congo is to [electric vehicles] what Saudi Arabia is to the
internal combustion engine.’
KOLWEZI,
Democratic Republic of Congo—Miners push bicycles piled high with bags
of a grayish-blue ore along a dusty road to a makeshift market. There,
they line up at wholesalers with nicknames such as Crazy Jack and Boss
Lee.
Most of the buyers are Chinese. Those buyers then sell
to Chinese companies that ship the bags, filled with cobalt, to China
for processing into rechargeable, lithium-ion batteries that power
laptops and smartphones and electric cars.
There is a world-wide
race to lock up the supply chain for cobalt, which will likely be in
even greater demand as electric-car production rises. So far, China is
way ahead.
China is by far the biggest consumer of cobalt from
Congo, the world’s biggest producer. Chinese refiners import about 94%
of their cobalt from the West African nation, according to Darton
Commodities.
“We’re realizing that the Congo is to [electric
vehicles] what Saudi Arabia is to the internal combustion engine,” says
Trent Mell, chief executive of exploration company First Cobalt Corp. ,
based in Toronto. Chinese firms are keenly aware of Congo’s importance
to electric vehicles, he says, and “trying to control the whole
ecosystem…from cobalt mining to battery production.”
China
already is the world’s largest electric-car market. In 2011, Beijing
listed electric vehicles as one of seven “strategic emerging
industries.” Developing a homegrown battery industry became a vital part
of the government-sponsored push. The Chinese government provides
subsidies to domestic battery makers, essentially locking out foreign
companies.
Companies from China now dominate the first steps in
the lithium-ion battery production process. Such firms produce about 77%
of refined cobalt chemicals, up from 67% in 2012, according to
commodities researcher CRU Group . George Heppel, a consultant at CRU,
says Chinese companies could soon have more than 90% of the market.
About
54% of the global cobalt supply comes from Congo. Chinese companies
dominate the network of middlemen who buy cobalt from freelance miners
such as those lining up at the market in Kolwezi.
Few commodities have
had more dramatic increases in demand than cobalt, primarily a byproduct
of copper and nickel mining. Global cobalt production has quadrupled
since 2000 to about 123,000 metric tons a year, according to the U.S.
Geological Survey.
Demand
is growing even faster and is expected to reach more than 200,000 tons
by 2025, according to researcher Wood Mackenzie. Electric cars are a big
reason why. About 1,300 metric tons of cobalt were used in electric
vehicles in 2014, Morgan Stanley estimates. The total is expected to
rise to 11,320 tons this year and 62,940 tons by 2025.
Such
expectations have caused cobalt prices to more than double in the past
year in London trading. Cobalt prices are up more than 230% since the
end of 2015, according to Thomson Reuters.
“If
our projections for electric vehicles are anywhere near close, there
are going to be some serious issues in the cobalt market” after 2020,
says Jack Bedder, an analyst who follows cobalt for the London
market-intelligence firm Roskill. Tight supply would give China yet
another advantage because of its strength in the cobalt supply chain.
Swiss
miner Glencore PLC is the world’s largest cobalt producer, including
27,400 tons from Congo last year. Glencore expects its output to more
than double in the next few years.
Much of the remaining 30,000
tons to 40,000 tons of Congolese cobalt comes from freelancers known as
creuseurs, the French word for diggers, or Chinese companies such as
China Molybdenum Co. and Zhejiang Huayou Cobalt Co. and small industrial
producers, according to traders.
Freelancers unearth cobalt with
picks and shovels, earning about roughly $300 per ton of ore, up from
$200 a year ago. U.S. and European companies have grown wary of cobalt
suppliers who buy from creuseurs, partly because some of the miners are
children. They rarely wear masks or other safety equipment. Crippling
injuries are common. Industry researcher Darton Commodities estimates
they produce as much as 14% of the cobalt output in the central African
nation.
Tesla Inc. said last year its cobalt supplier in Congo is
“very reputable,” without identifying the supplier. The auto maker sent
a team to the country to make sure its supply chain doesn’t include
child labor or cobalt mined by creuseurs. Tesla hasn’t said if it made
any changes as a result.
For years, traders who bought cobalt from
freelance miners often sold it to Congo DongFang International Mining, a
unit of Chinese giant Zhejiang Huayou, according to human-rights group
Amnesty International and other people familiar with Congo’s cobalt
market.
Contemporary
Amperex Technology Co., based in China’s coastal Fujian province, is
one of the country’s largest makers of electric-vehicle batteries.Photo:
Qilai Shen/Bloomberg News
A Zhejiang Huayou
spokesman says it stopped buying last April from wholesalers who cater
to creuseurs and is trying to buy more from industrial miners that have
greater control over the production process. The company is making the
changes with help from a nongovernmental organization called Pact, the
Zhejiang Huayou spokesman adds.
China Molybdenum in 2016 agreed to
purchase a giant copper and cobalt mine in Congo from U.S. mining giant
Freeport-McMoRan Inc. The mine supplies a Freeport facility in Finland
that produces about 20% of the processed cobalt sulfate used to make
batteries. Analysts say the rest of global cobalt sulfate production is
done in China....MUCH MORE
