Freyr looks to Glencore’s cobalt cut cathode for its battery needs

29 January 2021 saw Norwegian battery start up Freyr announce plans to list on the NYSE via a special purpose acquisition company (SPAC) as part of a business combination agreement with Alussa Energy Acquisition Corp. (Alussa) at a valuation of $1.4bn.

The deal included a number of strategic investment partners, notably the world’s largest cobalt producer Glencore.

This was followed on 1 February 2021 with Glencore announcing that the company had entered into a letter of intent (LOI) with Freyr to supply cobalt for its planned battery operations in Mo i Rana, Nordland, Norway.

Freyr intends to build up to 43 GWh of lithium ion cell production capacity at the site – considerable plans from the new battery entrant, which could require up to 10,000 tonnes per year of cobalt battery chemicals.

Whilst the exact timeline that the deal would follow was not made clear by the announcement, it did state a volume of 3,700 tonnes of cobalt metal to be supplied by Glencore’s Nikkelverk operation in Norway, roughly equivalent to just under a typical year of production at the operation.


Learn more about Benchmark’s Cobalt Price Assessment


The deal is not significant in volume terms if it runs for a number of years, which Benchmark expects it will, and is dwarfed by the 10-year deal inked in December 2020 between Glencore and Chinese refiner GEM, totalling up to 150,000 tonnes of cobalt hydroxide over the period.

It should be remembered the Freyr deal is not yet certain as the project is still under development and the company has no prior experience in cell manufacturing.

However, from Benchmark’s perspective, one of the most interesting things about this battery supply chain deal is the product it is for – cobalt metal in cut cathode form.

This form of metal has been little utilised by the battery supply chain and has largely been seen as a last resort for conversion to cobalt chemical. This is due to the preference for cobalt hydroxide, and the extended time taken for acid dissolution compared with other forms of metal with a larger surface area.

As such the announcement may have surprised many in the industry, who are aware of the challenges typically faced around dissolution of cut cathodes.

The deal, should it be formalised, will mark the first public long term cobalt supply agreement using cobalt metal cut cathode in the battery industry, something that could potentially cause concern amongst superalloy consumers.

To date, superalloy consumers, particularly those supplying aviation, have highlighted concerns about general cobalt market tightness linked to battery demand but have had a degree of protection, believing that cut cathode (the form generally needed by the industry) would not be consumed by the battery supply chain.

With demand for cobalt metal from the aviation sector depressed due to limited activity as a result of the ongoing COVID-19 pandemic, the supply chain has seen growing stocks of cut cathode recently, particularly for producers outside of China.

This will have given the superalloy sector some comfort knowing that feed should be available in the coming years despite the ongoing tightness for cobalt hydroxide linked to battery demand.

But should the battery sector begin to consume cut cathode, the superalloy industry will see direct competition for limited supply that it can ill afford to lose.

With hyper-strict qualification requirements from superalloy consumers for materials used, particularly in aviation, the process to accept new material from alternative suppliers can take a number of years for approval, meaning cut cathode supply from particular producers or “brands” in many cases can be a requirement, not just a preference.


Learn more about Benchmark’s Cobalt Price Assessment


And with much of the new cobalt supply dedicated to cobalt hydroxide and supplying the battery sector, metal supply is only expected to see limited growth in the coming years.

Fears over this competition may also see superalloy consumers move from typically 1-2 year supply deals to longer contracts, in order to secure the brands needed for their products, locking up yet more cobalt in increasingly long deals.

For Freyr, not only does this deal lock in a local dependable supply of high purity cobalt, avoiding the need for DRC (Democratic Republic of the Congo) sourcing, it would also contain a large proportion of recycled content from Glencore’s US based recycling operations which in part feed Nikkelverk.

With greater scrutiny on life cycle emissions associated with battery production, particularly in Europe, this is a highly prized selling point when negotiating contracts with OEMs.

Whilst the deal between Freyr and Glencore is not yet certain and will require significant project development from Freyr to become a guaranteed deal, it highlights a potential other avenue for cobalt in the battery supply chain under an increasingly tight cobalt hydroxide outlook.

It is not without its issues though, as the increased dissolution time typically associated with cut cathodes could increase costs to Freyr, something the downstream will likely struggle to accept, even with its green credentials.

Should the deal be confirmed, it may see a shift in the sourcing strategies of superalloy producers, who may choose to move to lock in the units they need rather than risk potentially losing them to battery consumers.

Benchmark’s Cobalt Price Assessment: Get access now. 

Fill in this form to subscribe to Benchmark’s Cobalt Price Assessment today.