Glencore Signs Cobalt Supply Deal with Samsung SDI

- February 10th, 2020

The five year deal will see Glencore supply Samsung SDI with up to 21,000 metric tons of cobalt contained in cobalt hydroxide between 2020 and 2024.

Swiss diversified miner Glencore (LSE:GLEN,OTC Pink:GLCNF) has signed its fourth long-term cobalt supply deal with a battery maker in less than a year ― this time with Korea’s Samsung SDI (KRX:006400).

The five year deal will see Glencore supply Samsung SDI with up to 21,000 metric tons of cobalt contained in cobalt hydroxide between 2020 and 2024.

The metal will come from Glencore’s mines in the Democratic Republic of Congo (DRC), the world’s top producer of the crucial battery metal.

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Mining in the DRC has been under scrutiny in recent years due to concerns over human rights abuses and child labor. Under the terms of the deal with Samsung SDI, Glencore’s operations will be independently audited each year to ensure ethical and responsible cobalt production and procurement.

In the African country, the top cobalt producer operates two mines: Katanga and Mutanda, which is the largest cobalt mine in the world. Last November, Glencore put Mutanda into care and maintenance due to a decline in cobalt prices and higher taxes, which resulted in global output of the battery metal being reduced by 20 percent, according to analysts.

Last week, Glencore reported total cobalt output from its African operations of 42,200 metric tons ― a 10 percent increase year-on-year. However, its Q4 output results felt the closure of Mutanda, with production falling 13 percent year-on-year to 11,900 metric tons.

Looking ahead, Glencore has cut its 2020 cobalt guidance to 29,000 metric metric tons ― almost 40 percent less than what it actually produced in 2019.

Despite lower expectations, Glencore continues to move ahead with its long-term supply deal strategy.

In 2019, the mining giant signed deals with Chinese battery materials maker GEM (SZSE:002340); Korean battery maker SK Innovation (KRX:096770); and Belgium-based Umicore (OTC Pink:UMICF,EBR:UMI), Europe’s largest producer of battery materials for the electric vehicle industry.

Adding these deals up alongside private deals, Benchmark Mineral Intelligence estimates Glencore has below 10 percent of its cobalt hydroxide supply not tied up in long-term deals between 2020 and 2024.

Moreover, battery makers are not the only ones on the hunt to ink long-term agreements with Glencore to secure supply. Last year, the Swiss company agreed to provide German automaker BMW (OTC Pink:BYMOF,ETR:BMW) with cobalt from its Murrin Murrin mine in Australia. And earlier this year, reports came out that Elon Musk’s Tesla (NASDAQ:TSLA) is in talks to sign a long-term cobalt deal with the major miner for its new factory in Shanghai.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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