Glencore's Cobalt Sale Helps China's Drive to Build Electric Vehicles

By Scott Patterson

Glencore PLC has agreed to sell a large chunk of its cobalt production to a Chinese company, a person familiar with the matter said, marking another victory for China in a race to lock up supplies of an important metal used in batteries for electric vehicles.

Glencore, the giant Swiss commodity producer and trader, signed a deal several weeks ago to provide more than 50,000 metric tons of cobalt over three years to GEM Co., a Shenzhen-listed chemicals firm, the person said. Glencore is the world's biggest cobalt producer, and the amount represents about a third of its production over the course of the deal.

Once an obscure metal in a relatively small market, cobalt is now projected to be in greater demand as electric-car production increases and smartphone use grows around the world. The scarce blue metal is an essential ingredient in lithium-ion batteries because of its ability to absorb high levels of heat.

Apple Inc., Tesla Inc., Volkswagen AG and other large companies have been scrambling to secure their own cobalt supplies from sources including Glencore, the company's chief executive, Ivan Glasenberg, said on a conference call in December.

"Electric vehicles will be disruptive to the world," Mr. Glasenberg said. "Cobalt is basically off the charts."

China is revving up its electric-vehicle industry, the largest in the world. The country has focused on dominating cobalt resources in the Democratic Republic of Congo, which turns out about 60% of the world's supply.

In 2011, Beijing listed electric vehicles as one of seven "strategic emerging industries." Chinese firms produce about 77% of refined cobalt chemicals, up from 67% in 2012, according to London commodities researcher CRU Group.

Glencore has two giant mining operations in Congo and controls about one-quarter of cobalt output world-wide. Glencore has said its Katanga Mining operation in Congo is expected to produce 34,000 tons of cobalt by 2019, likely making it the most productive cobalt mine in the world.

A report, commissioned by Glencore and issued by CRU, forecast that by 2030 the demand for cobalt to be used in electric vehicles could reach 314,000 metric tons, more than four times the current global supply.

One potential obstacle to gaining Congolese cobalt is the country's government, which is ratifying a new mining code over the objections of Glencore and other companies. The code scraps protections for mining companies and adds higher taxes and royalties for copper and cobalt.

"It's going to create underinvestment in the country," Mr. Glasenberg said last month.

Write to Scott Patterson at [email protected]