By CultureBanx Team
- Tesla strikes deal with Glencore to buy more cobalt from Africa for new car plants
- Democratic Republic of Congo accounted for around 64% of global mined cobalt production last year
Electric vehicle heavyweight Tesla (TSLA -0.30%) has secured a new cobalt deal with Glencore, even as it’s supposedly in the midst of phasing out the controversial mineral. Two-thirds of global cobalt supply comes from the Democratic Republic of Congo, where Glencore owns the largest mine for the mineral, and it’s exactly where Tesla wants the commodity sourced from, to make lithium-ion batteries at Gigafactories in Berlin and Shanghai. It’s possible that Glencore and Tesla’s latest supercharged battery deal could put the future stability of Africa’s sustainable cobalt supply in reverse.
Why This Matters: Tesla CEO Elon Musk just told CultureBanx in 2018, “We use less than 3% cobalt in our batteries & will use none in next [generation].” This statement seems to be very misleading now due to the amount of cobalt needed in its battery cells, along with its massive ramp-up. Democratic Republic of Congo accounted for around 64% of global mined cobalt production last year, according to the United States Geological Survey. Tesla is expected to still need large volumes of the mineral from the DRC going forward and the new Glencore deal will help them achieve that, because they can provide up to 6,000 tons of cobalt a year under the long-term partnership.
Glencore and Tesla’s latest deal could put the future stability of Africa’s sustainable cobalt supply in reverse
Deepening ties between Musk’s electric car maker and the Swiss mining group can help Glencore get back on track, as cobalt was meant to be part of its strategic advantage as the world switches to electric vehicles, but has become more of a liability. Cobalt prices have shrunk from above $60,000 per tonne in late 2018 to around $25,000 in 2019. Also, Darton Commodities predicts cobalt use in batteries is going to jump from 50,000 tons in 2016 to more than 320,000 tons by the year 2030.
Tesla is making sure that cobalt doesn’t become the Achilles heel for its Asia expansion ambitions, as they already use Glencore’s cobalt in their Shanghai Gigafactory. However, the Congolese government has increased its tax on Cobalt exports by 50% and is considering labeling the metal a strategic resource. This would increase the royalty for Cobalt from 2% to 10%, making it more expensive for companies like Tesla to use in its products.
Situational Awareness: Most tech and auto companies using cobalt have taken steps to avoid sourcing from cobalt mines that rely on child labor, but it’s a hard thing to track since it changes hands several times before reaching a battery cell at the end of the supply chain. Tesla has tried to defend its cobalt sourcing in a report on its site, though it did not quell concerns about political instability and the challenges of ethical sourcing in Africa.
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