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General Market Commentary
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General Energy
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General Market Commentary
Battery makers descend on Australia, Canada cobalt developers
MELBOURNE/VANCOUVER (Reuters) - Nervous Asian battery makers are turning to early-stage cobalt projects in Australia and Canada to lock in supplies of the critical battery ingredient ahead of expected shortages as demand for electric vehicles revs up.
Mine developers say interest from Japanese and Korean firms is particularly strong as they compete with rivals from China, which has built deep supply chain ties with the Democratic Republic of Congo, the world’s top producer.
The central African country accounts for nearly two-thirds of global cobalt output and production is set to rise despite concerns over the use of child miners and rising royalties.
“We are starting to see the first signs of an arms race to secure long term cobalt supplies,” said Joe Kaderavek, chief executive of Australia’s Cobalt Blue.
“With over 85 percent of new global cobalt supply over the next decade coming from Africa, in a region where the Chinese have entrenched relationships, the Korean and Japanese cobalt processing industries are very focused upon Australian and Canadian projects.”
South Korean battery maker SK Innovation Co Ltd locked in a seven-year supply deal with Australian Mines last month, helping to win funding for a project that has yet to make a final investment decision and does not expect to produce any cobalt until at least 2020.
At least half a dozen Australian and Canadian mine developers are currently in talks on potential supply deals with battery and automakers for production at some point beyond late 2019-2021, company executives told Reuters.
These include Australia’s Aeon Metals, Northern Cobalt and Cobalt Blue, and Canada’s Ecobalt and Fortune Minerals.
China’s Beijing Easpring Material Technology Co, which makes products for battery makers, has also signed a binding five-year deal with Australian mine developer Clean Teq.
“We are speaking to a number of parties about the balance of the offtake - that includes not just Chinese potential customers but also customers from other parts of the world,” Clean Teq’s CEO Sam Riggall told Reuters.
In an indication of heightened demand, Riggall said automotive companies were also showing interest, along with cathode manufacturers, the direct users of cobalt, a key material in lithium-ion batteries.
DRC GROWTH
In the DRC, production is set to rise sharply, driven by commodity giant Glencore Plc, the world’s biggest producer, and Luxembourg’s ERG taking DRC’s share of global output to over 75 percent by 2023, according to UK-based Darton Commodities.
Glencore last week agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM Co Ltd.
Developments in Australia and Canada will be small to mid-size, producing around 1,000 to 5,000 tonnes each, in a global market expected to swell to some 157,000 tonnes by 2023.
Fortune Minerals said it has signed 25 confidentiality agreements, while Australia’s Ardea Resources said it has seen significant interest.
“Certainly some of the groups that we have spoken to have said that they won’t look at DRC sources, they want clean ethical sources of cobalt,” said Ardea Managing Director Matthew Painter.