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EUROPEAN EXPANSION UNDERWAY","umicores-european-expansion-underway","article/umicores-european-expansion-underway",{"_uid":557,"date":558,"tags":559,"editor":563,"content":573,"excerpt":779,"featured":50,"reporter":780,"_editable":784,"component":785,"seo_title":553,"categories":786,"visibility":793,"author_company":49,"featured_image":794,"seo_description":779,"author_full_name":49,"author_job_title":49,"formattedDate":799,"formattedArticleDate":800},"05ae8b18-7e46-48c5-b593-e68df7fd8a1f","2019-07-22 00:00",[560],{"slug":561,"name":562},"umicore","Umicore",[564],{"slug":565,"name":566,"content":567},"didi-bostock","Didi Bostock",{"job_title":568,"image":569,"bio":571,"linkedin":572},"Editor - Energy Transition & Economics",{"filename":570},"https://a.storyblok.com/f/287943243085208/512x512/2c5ca5c1a3/didi-bostock.jpeg","Didi is the Energy Transition & Economics Editor at Benchmark, covering a broad range of markets across the energy transition. His remit spans from downstream sectors such as BESS and EVs, through to midstream such as new technologies and battery production, to upstream critical minerals mining. He also leads on financial analysis across these supply chains, alongside in-depth policy analysis.\n","https://www.linkedin.com/in/didi-bostock-656342198/",{"type":574,"content":575},"doc",[576,584,590,595,602,607,612,617,628,633,638,643,648,655,660,665,670,675,687,694,699,704,709,714,719,724,734,739,744,749,754,759,764,769,774],{"type":577,"attrs":578,"content":580},"heading",{"level":579,"textAlign":49},4,[581],{"text":582,"type":583},"In its latest European move, Umicore agrees to purchase Freeport Cobalt’s refining and precursor operations for $150 million at its operation in Kokkola Finland","text",{"type":585,"attrs":586,"content":587},"paragraph",{"textAlign":49},[588],{"text":589,"type":583},"The end of May saw Umicore announce that it would purchase Freeport Cobalt’s refining and precursor operations in Kokkola, Finland. The $150 million deal has to go through regulatory approvals but is expected to be finalised at the end of the year.",{"type":585,"attrs":591,"content":592},{"textAlign":49},[593],{"text":594,"type":583},"The deal will see Umicore take on the refinery and battery precursor operations, including coarse cobalt powders, from Freeport Cobalt while the cobalt fine powders, ceramics, pigments, chemicals and catalysts activities will continue to be operated onsite by Freeport Cobalt.",{"type":585,"attrs":596,"content":597},{"textAlign":49},[598,600],{"text":599,"type":583},"Since the owner of Freeport Cobalt, Freeport McMoRan, agreed the sale of the Tenke Fungurume Mine (TFM) in the Democractic Republic of the Congo (DRC) – which they majority owned as part of a joint venture with Lundin Mining Corporation and La Générale des Carrières et des Mines (Gécamines) – to China Molybdenum",{"text":601,"type":583},"for $2.65 billion in 2016, a deal to sell the refinery has been a likelihood.",{"type":585,"attrs":603,"content":604},{"textAlign":49},[605],{"text":606,"type":583},"Whilst Freeport have been keen to sell the refinery since 2016, they had, up until recently, not found a suitable buyer.",{"type":585,"attrs":608,"content":609},{"textAlign":49},[610],{"text":611,"type":583},"Initially, as part of the sale of the TFM, China Molybdenum had the exclusive right to purchase the refinery for $100m prior to 31 December 2016, the deadline for the purchase was extened while talks continued into 2017 but the chances of a deal were ended later that year.",{"type":585,"attrs":613,"content":614},{"textAlign":49},[615],{"text":616,"type":583},"As part of the sale of TFM Freeport Cobalt retained the right to cobalt raw material supply from the mine as part of a long-term contract.",{"type":585,"attrs":618,"content":619},{"textAlign":49},[620,622,624,626],{"text":621,"type":583},"This long-term contract had been reported to be a major sticking point for the sale of the refinery as it was understood that a sale would void the deal that saw Tenke Fungurume supply the refinery. It was therefore expected that the new owners of the refinery would have to find new source material to feed the refinery, which ",{"text":623,"type":583},"Benchmark Minerals ",{"text":625,"type":583},"estimates consumed 13,000 tonnes of cobalt in",{"text":627,"type":583},"2018, which was just under 10% of global supply.",{"type":585,"attrs":629,"content":630},{"textAlign":49},[631],{"text":632,"type":583},"However, the latest supply deal announced this quarter between Umicore and Glencore (read on for details), will likely affect the source of feedstock for Kokkola.",{"type":577,"attrs":634,"content":635},{"level":579,"textAlign":49},[636],{"text":637,"type":583},"UMICORE’S EUROPEAN SUPPLY CHAIN",{"type":585,"attrs":639,"content":640},{"textAlign":49},[641],{"text":642,"type":583},"The Kokkola operation is the only large-scale cobalt refinery outside of China and the purchase is key for Umicore to achieve its battery supply chain plans in Europe, which the company began outlining last year.",{"type":585,"attrs":644,"content":645},{"textAlign":49},[646],{"text":647,"type":583},"Umicore announced that Kokkola will supply lithium ion battery precursor (the feestock material to make cathode) to its cathode materials production facility in Nysa, Poland, which is currently under construction with a plan to begin production in the second half of 2020.",{"type":585,"attrs":649,"content":650},{"textAlign":49},[651,653],{"text":652,"type":583},"The development of Europe’s lithium ion battery supply chain has been disproportionately focussed on battery megafactory cell capacity. There are",{"text":654,"type":583},"now 12 European megafactories in the pipeline, 3 of which are in production today and 11 of which should be in production by 2023, by 2028 the annual capacity for these 12 megafactories is set to be over 300 GWh.",{"type":585,"attrs":656,"content":657},{"textAlign":49},[658],{"text":659,"type":583},"Umicore’s recent announcements are amongst the first major steps in building the supply chain upstream of battery cell production in Europe and significant to the company on its journey to building its own vertically integrated approach.",{"type":577,"attrs":661,"content":662},{"level":579,"textAlign":49},[663],{"text":664,"type":583},"HEADWINDS FACING PROCESSORS",{"type":585,"attrs":666,"content":667},{"textAlign":49},[668],{"text":669,"type":583},"However, it hasn’t been plain sailing for Umicore over the quarter. In April, the company announced it was downgrading its EBIT guidance for 2019. In a press release the company cited a deterioration in demand for cathode materials, particularly in China and Korea, as China’s electric vehicle subsidies have decreased.",{"type":585,"attrs":671,"content":672},{"textAlign":49},[673],{"text":674,"type":583},"Another factor for which Umicore is attributing to its lowered profit guidance is depressed cobalt prices and an inflow of artisanal cobalt, which the company claims, has allowed its competitors to sell cobalt-containing products at discounted prices.",{"type":585,"attrs":676,"content":677},{"textAlign":49},[678,680,682,684,685],{"text":679,"type":583},"Prices for cobalt products are down across the board, with the ",{"text":681,"type":583},"Benchmark Minerals’ ",{"text":683,"type":583},"cobalt hydroxide and cobalt battery metal prices down -50% year to date, and ",{"text":681,"type":583},{"text":686,"type":583},"cobalt sulphate prices down -39%.",{"type":585,"attrs":688,"content":689},{"textAlign":49},[690,692],{"text":691,"type":583},"Consequently, Umicore has also delayed its cathode material production targets by 12 to 18 months. As part of its €660 million investment into its battery materials business across China and Europe the company had previously announced targets of 100,000 tonnes of cathode material",{"text":693,"type":583},"production in 2019 and 175,000 tonnes by 2021.",{"type":577,"attrs":695,"content":696},{"level":579,"textAlign":49},[697],{"text":698,"type":583},"PRESSURES ACROSS INDUSTRY",{"type":585,"attrs":700,"content":701},{"textAlign":49},[702],{"text":703,"type":583},"One of Umicore’s main competitors, Huayou Cobalt, is also facing margin pressures as it announced a 98% decrease in its year-on-year profits for Q1 2019, citing falling cobalt prices as the main cause.",{"type":585,"attrs":705,"content":706},{"textAlign":49},[707],{"text":708,"type":583},"Furthermore, in Q2 2019 the company announced they had significantly reduced production of cobalt sulphate following price falls and had moved some production over to nickel sulphate due to better margins.",{"type":585,"attrs":710,"content":711},{"textAlign":49},[712],{"text":713,"type":583},"However, despite these dramatic falls in profitability the company moved to increase its supply chain dominance as it outlined plans to acquire Tianjin Bamo, a large-scale cathode manufacturer, in which Huayou already had a large stake.",{"type":585,"attrs":715,"content":716},{"textAlign":49},[717],{"text":718,"type":583},"The challenges faced by Umicore and Huayou highlight the competitive nature within the cobalt and cathode markets. As margins are depleting, investments in expansions and R&D are becoming more challenging – at a time when they are most critical to remain at the top tier of the industry.",{"type":585,"attrs":720,"content":721},{"textAlign":49},[722],{"text":723,"type":583},"Despite the pressures facing the cathode market recently, investments continue and production capacities are increasing. H1 2019 saw Brunp, a CATL subsidiary, announced plans for a 100,000 tpa precursor and 100,000 tpa cathode plant located close to the company’s headquarters in Fujian province.",{"type":585,"attrs":725,"content":726},{"textAlign":49},[727,729,730,732],{"text":728,"type":583},"Brunp plan to build the project in two stages over 5 years and will invest RMB 9.13b ($1.4b). ",{"text":623,"type":583},{"text":731,"type":583},"estimates this facility alone could consume up to 12,000 tpa of cobalt",{"text":733,"type":583},"depending on the exact breakdown of cell chemistries produced at the facility.",{"type":577,"attrs":735,"content":736},{"level":579,"textAlign":49},[737],{"text":738,"type":583},"UPSTREAM OVERSUPPLY?",{"type":585,"attrs":740,"content":741},{"textAlign":49},[742],{"text":743,"type":583},"Looking upstream, Glencore announced two key supply deals during the quarter.",{"type":585,"attrs":745,"content":746},{"textAlign":49},[747],{"text":748,"type":583},"Glencore and Umicore agreed a global supply partnership for cobalt. Glencore will supply cobalt hydroxide from its Katanga and Mutanda mining operations in the DRC to Umicore’s global refining sites. This will include Umicore’s newly acquired Kokkola facility once the purchase of the refinery is complete, which is expected in late 2019.",{"type":585,"attrs":750,"content":751},{"textAlign":49},[752],{"text":753,"type":583},"The partnership will help to reduce pressure on Glencore which is likely struggling with the financial strain of a growing stockpile of cobalt hydroxide in the DRC in the currently oversupplied market, particularly with such rapid price decreases seen in 2019.",{"type":585,"attrs":755,"content":756},{"textAlign":49},[757],{"text":758,"type":583},"As mentioned previously, the Kokkola facility’s feedstock was supplied by TFM which is owned by China Molybdenum. The new deal suggests that a significant portion of the refinery’s feed will now come from Glencore. China Molybdenum will continue to supply some material at reduced volumes – likely to the remaining business in Freeport Cobalt’s hands. While the arrangement is expected to have little impact on the industry’s supply-demand balance, it will shift power within the market.",{"type":585,"attrs":760,"content":761},{"textAlign":49},[762],{"text":763,"type":583},"Once the Kokkola deal is complete and Umicore begins to receive production from Glencore, China Molybdenum will need to market its TFM product to new customers, most likely in China. This adds to growing competition in the cobalt hydroxide market, and is likely to have a negative impact on pricing in the near term during this current period of oversupply.",{"type":585,"attrs":765,"content":766},{"textAlign":49},[767],{"text":768,"type":583},"In addition to the Umicore deal, Glencore signed a memorandum of understanding (MOU) with cobalt project developer First Cobalt Corp (FCC) to supply the First Cobalt refinery located in Ontario, Canada. Glencore will provide feedstock to the refinery which will allow the plant to produce up to 2,000-2,500 tonnes of cobalt contained in sulphate per annum.",{"type":585,"attrs":770,"content":771},{"textAlign":49},[772],{"text":773,"type":583},"If formalised, the agreement could see cobalt sulphate production from the refinery within 18-24 months. Glencore is currently evaluating the option to provide a loan to fund recommissioning the facility which would enable production in this time frame.",{"type":585,"attrs":775,"content":776},{"textAlign":49},[777],{"text":778,"type":583},"The current terms of the MOU state that FCC will toll Glencore’s feed material, the sulphate produced will then be marketed by Glencore giving the company more direct downstream access to the battery supply chain.","In its latest European move, Umicore agrees to purchase Freeport Cobalt’s refining and precursor operations for $150 million at its operation in Kokkola Finland The end of May saw Umicore announce that it would purchase Freeport Cobalt’s refining and precursor operations in Kokkola, Finland. The $150 million deal has to go through regulatory approvals but […]",[781],{"slug":565,"name":566,"content":782},{"job_title":568,"image":783,"bio":571,"linkedin":572},{"filename":570},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"05ae8b18-7e46-48c5-b593-e68df7fd8a1f\", \"id\": \"\"}-->","article",[787,790],{"slug":788,"name":789},"batteries","Batteries",{"slug":791,"name":792},"critical-minerals","Critical Minerals","private",{"id":49,"alt":795,"name":795,"focus":795,"title":795,"source":795,"filename":796,"copyright":795,"fieldtype":797,"meta_data":798,"is_external_url":51},"","https://a.storyblok.com/f/287943243085208/42017a23dc/bm-screen-shot-2019-07-22-at-124248.png","asset",{"alt":795,"title":795,"source":795,"copyright":795},"Jul 22, 2019","22nd July 2019",[],[],1792773942742]