Volkswagen Is Said to Step Up Bid for Cobalt for Electric Cars

(Bloomberg) -- Volkswagen AG is stepping up its hunt for long-term supplies of battery metals it will need to help power electric cars across its entire range.

The top automaker invited producers and traders of cobalt, one of this year’s best-performing metals, for talks at its German headquarters this week, people familiar with the matter said. Buying the critical battery component might not be as simple as first thought -- after issuing a tender in September, the firm has since relaxed demands for offers at a discounted fixed price, said the people, who asked not to be identified because the talks are private.

Volkswagen Is Said to Step Up Bid for Cobalt for Electric Cars

Volkswagen is in “intensive talks” with producers of materials for electric cars, the company said in an email, adding that the discussions also deal with transparency, compliance and sustainability in the commodities supply chain.

Traditionally used to harden steel, cobalt’s ability to conduct electricity has made it an essential part of rechargeable batteries. That has left users scrambling to secure supplies, most of which come from the Democratic Republic of Congo. Securing long-term purchases will be crucial for Volkswagen because it plans to spend more than 34 billion euros ($40 billion) in the next five years as part of a push into battery-powered vehicles and autonomous-driving systems.

The electric car boom could see cobalt demand jump as much as 47-fold by 2030, according to Bloomberg New Energy Finance. The metal is up 86 percent this year at $61,000 a metric ton on the London Metal Exchange.

Higher Price

High prices and supply constraints are prompting some automakers to invest in new battery technologies less reliant on cobalt. Still, cobalt is likely to trade above its 2008 peak of $107,000 for a “sustained period” as miners seek new sources of supply, Sanford C Bernstein & Co Ltd. said in a September report.

The world’s biggest miners of the metal include Glencore Plc, Eurasian Natural Resources Corp. and China Molybdenum Co. Last year, Glencore shipped 24,500 tons from its Mutanda mine in Congo, or almost a quarter of global production. Nickel mines, such as those run by Sherritt International Corp. in Madagascar and Vale SA in New Caledonia, also produce cobalt, but in much lower volumes than Congo’s copper projects.

The African country accounts for about two-thirds of global output. While most of that is from mines run by Glencore and China Molybdenum, about 10 to 20 percent comes from informal digging that groups like Amnesty International allege may use child labor. The dependence on Congo and risk that metal mined in dangerous conditions may enter the global supply chain raises the need for users to secure reliable, transparent supplies.

©2017 Bloomberg L.P.

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