One of the world’s most prominent electric vehicle (EV) manufacturers, Tesla, and Swiss commodities giant Glencore have agreed to a large-scale cobalt supply deal that could see Tesla sourcing as many as 6,000 tonnes of the metal annually from Glencore.In parallel to the newly signed agreement with Glencore, Tesla said it also extended its relationship with current battery partner Panasonic to 2030, locking in prices until 2023 in the process.The supply deal with Glencore puts into question previous statements that Considering the company’s intention of securing future supplies, it seems cobalt will remain critical to the developing EV battery industry.In addition to Samsung (and now Tesla), Glencore has also inked supply deals with Korean battery manufacturer SK Innovation, Belgian chemicals giant Umicore, Chinese battery recycler GEM and German carmaker BMW.The Glencore contract is expected to help Tesla secure long-term cobalt supplies at amiable rates as the company continues to up-scale operations and builds more gigafactories.Tesla is hopeful that a deal with Glencore will provide long-term supply chain assurance, reduce average costs, and, possibly most valuable – generate a positive public relations angle given that around 60% of the world’s cobalt is currently sourced from the Democratic Republic of Congo.The DRC is alleged to be concealing horrific human rights abuses including genocide and slave labour, which critics say, are fuelled by rampant demand for valuable commodities such as lithium and cobalt.Following the lead of other tech companies such as Apple and Panasonic, Tesla published an “impact report” into its existing business practises and raw material supply sources, saying that it had made a “significant effort” to reduce the chance of purchasing raw materials obtained via slave labour.According to Tesla, it will deploy its bolstered cobalt supply at its recently opened Shanghai gigafactory, in addition to a further factory planned to be built in Germany.Analyst estimates suggest that Tesla’s Chinese gigafactory will produce 3,000 cars per week once fully operational – an output level that would require Tesla to offtake at least 1,200t of cobalt per year.In Germany, Tesla intends to produce 500,000 cars per year once at full capacity.Most of Tesla’s production is done in Nevada, at its ancestral home where the company opened its first gigafactory in 2016.In March this year, Tesla said it produced its 1 millionth electric car with its Model 3 ranking as the world’s “all-time best-selling plug-in electric car”, with more than 500,000 sold to date.Since being founded in 2003, Tesla has quickly advanced and expanded to become one of the world’s leading EV manufacturers.However, EVs need lithium-ion batteries which has been a problematic issue for Tesla, given that the company does not manufacture its own batteries and is forced to rely on third-party vendors.To build the circa 400,000 cars it sells globally every year, Tesla sources batteries from Japanese giant Panasonic.According to a regulatory filing, Tesla’s amended deal with Panasonic – referred to as “2020 GTC” – is set to expire in 2030 and is dependent on Panasonic achieving manufacturing milestones.The terms of the deal also stipulate pricing arrangements until 2023 for Panasonic’s 2170 cells made in Nevada, assuring a production volume from Panasonic and a purchase volume commitment from Tesla.Despite having a long-term agreement for battery supply courtesy of Panasonic, Tesla may yet commit to going the extra mile and taking the entire EV supply chain in-house.Currently, Tesla is the world’s best-selling EV manufacturer, selling almost 250,000 cars in 2018 and almost 370,000 cars in 2019.
I’m also the first black woman to anchor a daily news show from the New York Stock Exchange.
Previously, I produced TV for the number one business news network on CNBC’s top rated shows Squawk on the Street and Squawk Alley. “This is the perfect opportunity for Glencore, Tesla and all investors to build a better future and to set the international bar," said Bonnie Lyn de Bartok, founder and CEO of social-impact data analytics firm S-Factor.
Spain. The company retains a market share of 17% of the plug-in and 23% of the battery-electric segment respectively.A supply deal with Glencore could be advantageous for both parties considering that Tesla is seeking to raise the number of cars it manufactures while Glencore is keen to lock-in offtake agreements to guarantee future sales.Both cobalt and lithium prices – the two pivotal metals behind the EV revolution – have ebbed and lost their allure over the past two years following several spikes on the back of growing adoption of EVs.Cobalt prices have shed 50% over the past three years while lithium prices have plunged 71%.There is ample cobalt supply currently due to a hoard of new exploration activity over the past five years.However, demand is expected to rise over the next decade, fuelled by consumers shifting towards EVs.Tesla is planning to expand its operations in prime markets such as China with plenty of competition in the form of China’s BYD and Germany’s power brands such as VW and BMW, also seeking to capitalise on the growth in EVs.As a result, both for operational and reputational reasons, Tesla is seeking to secure long-term cobalt supply. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics. Tesla has been increasing control over its supplies while other auto makers have counted on external battery producers to source cobalt. Doing so now, when prices are depressed, could also prove to be a masterstroke through the clarity of hindsight in the years to come.The timing of the deal could mean that Tesla is seeking to take advantage of the current commodity price slump, or, that the EV maker is laying the foundations to obtain complete independence from external battery suppliers by eventually bringing battery cell production in-house.The latter rationale could prove to be most accurate, given that last year, Tesla agreed a US$218 million (A$316 million) deal to buy Maxwell, a supercapacitor manufacturer with proprietary battery cell technology.Possibly as a sarcastic exaggeration that highlights his imperious eccentricity, Elon Musk quipped that as Tesla “scales battery production to very high levels, we have to look further down the supply chain and we might get into the mining business”, at the company’s annual meeting last year.Whether or not Tesla does, in fact, delve into cobalt mining remains to be seen, but for the time being, the EV maker is busy stockpiling the required materials for a turbo-charged EV production push in the years to come.George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. Small Caps is Australia's #1 site for news & information on ASX listed small cap companies. Copyright 2020 Small Caps. We want to hear from you.Sign up for free newsletters and get more CNBC delivered to your inboxGet this delivered to your inbox, and more info about our products and services. Data is a real-time snapshot *Data is delayed at least 15 minutes. Small Caps and affiliated companies accept no responsibility for any claim, loss or damage as a result of information provided or its accuracy.
I was raised in investment banking while working at UBS internationally and Goldman Sachs in the states. Glencore is the largest industrial supplier of cobalt in the world and could provide Tesla with up to 6,000 tons of cobalt a year under the long-term partnership. Tesla is hopeful that a deal with Glencore will provide long-term supply chain assurance, reduce average costs, and, possibly most valuable – generate a positive public relations angle given that around 60% of the world’s cobalt is currently sourced from the Democratic Republic of Congo. Indeed, direct deals with miners are rare in the auto sector, and the agreements between Glencore, Tesla and other carmakers including BMW Almost three-quarters of the world’s cobalt comes from the Democratic Republic of Congo, where as much of 20% of the country’s cobalt output is produced at informal makeshift mines where fatalities and human-rights abuses including child labor are commonplace.To be sure, ESG-focused investors and analysts see a massive opportunity for the likes of Glencore - and Tesla - to do something to address human rights and other social issues that are pervasive issues in the mining industry but not widely known.
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