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Abu Dhabi, UAESunday 24 June 2018

Apple to secure cobalt directly from miners to hedge against shortage

iPhone maker is one of the world’s largest end users of cobalt for the batteries in its gadgets

The Apple logo on the power management supply integrated circuit of an iPhone. Brent Lewin/Bloomberg
The Apple logo on the power management supply integrated circuit of an iPhone. Brent Lewin/Bloomberg

Apple is in talks to buy long-term supplies of cobalt directly from miners for the first time, according to people familiar with the matter, seeking to ensure it will have enough of the key battery ingredient amid industry fears of a shortage driven by the electric vehicle boom.

The iPhone maker is one of the world’s largest end users of cobalt for the batteries in its gadgets, but until now it has left the business of buying the metal to the companies that make its batteries.

The talks show that the tech giant is keen to ensure that cobalt supplies for its iPhone and iPad batteries are sufficient, with the rapid growth in battery demand for EVs threatening to create a shortage of the raw material. About a quarter of global cobalt production is used in smartphones.

Apple is seeking contracts to secure several thousand metric tonnes of cobalt a year for five years or longer, according to one of the people, declining to be named. Its first discussions on cobalt deals with miners were more than a year ago, and it may end up deciding not to go ahead with any deal, another person said.

An Apple spokesman declined to comment. Glencore chief executive Ivan Glasenberg late last year named Apple among several companies the miner was talking to about cobalt, without giving further details.

The move means Apple will find itself in competition with car makers and battery producers to lock up cobalt supplies. Companies from BMW and Volkswagen to Samsung SDI are racing to sign multi-year cobalt contracts to ensure they have sufficient supplies of the metal to meet ambitious targets for electric vehicle production.

Australian Mines, developing the Sconi mine in Queensland state, this week agreed a cobalt and nickel supply deal with SK Innovation, South Korea’s top oil refiner, that’s worth about $3.9 billion at current prices, the Perth-based company said Wednesday.

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SK Innovation, which plans to use the raw materials at an EV battery manufacturing plant in Hungary, agreed to buy all of the project’s planned output for up to 13 years, according to the filing.

BMW is also close to securing a 10-year supply deal, the car maker’s head of procurement told German daily FAZ in early February.

Cobalt is an essential ingredient in lithium-ion batteries for smartphones. While those devices use about eight grams of refined cobalt, the battery for an electric car requires over 1,000 times more. Apple has around 1.3 billion existing devices, while Apple chief executive Tim Cook has been bullish about the prospects for electric vehicles.

The price of cobalt has more than tripled in the past 18 months to trade above $80,000 a tonne. Two-thirds of supplies come from the Democratic Republic of Congo, where there has never been a peaceful transition of power and child labour is still used in parts of the mining industry.

In recent years, Apple has stepped up its engagement with cobalt suppliers after the origin of the metal in its supply chain came under scrutiny from human rights groups. In a report in early 2016, Amnesty International alleged that Apple and Samsung Electronics’ Chinese suppliers were buying cobalt from mines that rely on child labour.

Last year, Apple published a list of the companies that supply the cobalt used in its batteries for the first time, and said it would not let cobalt from small-scale mines in Congo into its supply chain until it could verify that the "appropriate protections" were in place.