Responsible sourcing concerns and the reconfiguration of the cobalt market

By RCS Global Group

While this past month has seen a logical slowdown in responsible sourcing news following the OECD Forum, the impact of cobalt sustainability requirements is starting to increase and reach most upstream suppliers. Umicore’s acquisition of the joint venture between Freeport McMoRan and Lundin Mining, Freeport Oy Cobalt, shows the increasing integration of the cobalt supply chain, with companies controlling both the upstream and downstream aspects of production.

Interestingly, the Belgian giant announced a few days later the reorganisation of Europe’s largest cobalt refinery sourcing practices, which until now received materials mostly from Tenke Fungurume Mining International. Due to new internal requirements on responsible sourcing Umicore signed a major long-term agreement with Glencore to source from Mutanda and Kamoto Copper Company (KCC), both operations satisfying increased due diligence on the origin of the minerals.

This move should also be read in the context of the Cobalt Industry Responsible Assessment Framework (CIRAF), which requires companies to proactively adopt good practice due diligence management systems for cobalt based on existing international standards including the OECD Due Diligence Guidance.

Copper is also increasingly at the forefront of stakeholder attention with the publication of a report by Swedwatch focused on tackling environmental concerns and community relationship issues in the Zambian copper industry. The industry is facing growing pressure from governments as well, with Lusaka currently involved in an arm wrestle with Konkola Copper Mines (KCM), a subsidiary of Vedanta Resources, over the liquidation process. RCS Global Group’s monitoring of incidents also highlights the prevalence of copper-related challenges, including OHS, political and social risks.

These challenges create a need for specific guidance, which the International Copper Association (ICA) will now provide through the Copper Mark. This Risk Readiness Assessment (RRA)-aligned framework recognises other schemes to avoid duplication of audits and will accept applications starting end of 2020 at the earliest.

From a  downstream perspective, responsible sourcing is also impacting corporate behavior and integration strategies. Volkwagen announced its planned involvement in battery manufacturing in Germany’s Lower Saxony region with a $1 billion investment alongside a rumored partner thought to be SK Innovation.

Volvo also committed to multi-billion dollar agreements with CATL and LG Chem, and is due to complete the electrification of 50% of its product offering by 2025. In this context, and quite logically, sources of raw materials and their extraction are gaining increased attention to shift from high-risk areas to more business-stable countries. This has been well highlighted this month with First Cobalt’s efforts to relaunch its Canadian refinery receiving input from the company’s Idaho and Ontario operations and the development of new lithium deposits, including in the United States and Serbia.

Nevertheless, CAHRAs remain at the core of battery raw material sourcing. The agreement between First Cobalt and Glencore for cobalt input highlights this trend as much as the focus on the Democratic Republic of Congo (DRC)’s lithium resources in the Manono Territory.

Beyond battery metals, it is important to note that the International Tin Association (ITA) International Tin Supply Chain Initiative (ITSCI) is facing blowbacks in Central Africa, including legal action by the only Ugandan tungsten producer. In the region, the DRC remains at the centre of corruption scandals as described in reports by the Sentry and the Enough Project, while the government is increasingly regulating the mining sector, including with subcontracting regulations aiming at keeping added value in the country.

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