The raw materials sector in the cleaning phase

Massive nickel mining projects are underway in New Caledonia. Last year, plans to sell a major nickel mine to a foreign consortium led by Trafigura met strong local opposition. © Biosphoto / Thibaut Vergoz – Rights Managed – Copyright Protected Work

Electric car manufacturers and other companies active in renewable energy seek to control their supply chains for minerals and metals. In doing so, they bring attention to commodity trading companies. Who study their solutions.

This content was posted on September 19, 2021 – 09:00

To meet global targets in the face of climate change, demand for minerals and metals – cobalt, copper, nickel and others – used in green technologies – such as rechargeable batteries – would have to increase exponentially. The International Energy Agency (IEA) estimates that use of these minerals will need to increase sixfold or more to achieve “net zero emissions” of greenhouse gases by 2040. Demand could be multiplied by 40 for certain materials, such as lithium.

But as companies profit from the minerals boom, skepticism prevails about the sustainability of large mining projects, defined as essential for the transition to green energy. Many minerals are concentrated in a handful of countries and the race is on to claim what remains. Companies are traveling to increasingly remote regions such as the Andes or the Arctic – with all that entails new social and environmental challenges.

“Going green is sometimes used as a justification for establishing a new industry that condemns the business practices of indigenous peoples,” Sami parliament speaker Aili Keskitalo recently told the Swiss Green Economy Symposium (SGES). The only officially recognized indigenous people in Europe, the Sami people have spoken out against the construction of the first electrified copper mine with “zero net emissions” in northern Norway.

Lawsuits, violent protests and protests against the rapid expansion of mining projects in many parts of the world have prompted electric vehicle companies and green energy stars to scrutinize their supply chains for minerals and metals. lawsexternal link proposals by the European Union put even more pressure on battery companies, with the aim of forcing them to deal with social risks in their supply chains.

Several Swiss companies are essential links in these chains. Glencore, Mercuria and Trafigura extract, process, transport and market the materials in question. About 60% of international trade in base metalsexternal link like zinc, copper and aluminum are processed in Switzerland. And some companies, like Glencore, also participate in their extraction. Even if they never touch Swiss soil, many minerals and metals – especially those from small mines – pass through the hands of Swiss traders.

“Supply is limited. The industry as a whole, and Glencore in particular, is working hard to develop the pipeline of projects that can meet the demand,” Anna Krutikov said during a panel discussion at ESMS. “As we look to source new materials, risks associated with precipitation are of primary concern.”

Indeed, companies active in green technologies, such as Tesla, take these risks seriously. And many apply strict traceability and sustainability criteria to their raw material sources. With direct repercussions on metal traders.

The Cobalt Dilemma

Nowhere are supply challenges more evident than in the Democratic Republic of Congo (DRC). And very few metals have as many supply problems as cobalt. About 60% of this metal – a by-product of copper and nickel mining – comes from the DRC. Of which 15-30% is the product of artisanal small-scale mining (ASM). Cobalt is an essential component of rechargeable lithium-ion batteries used in smartphones, laptops and other electric cars.

Many reports document hazardous working conditions in this type of production, as well as safety issues and the widespread use of child labor. In 2019, a human rights group filed a lawsuit on behalf of Congolese families accusing Tesla, Apple, Microsoft and others of “aiding and abetting” mines using child labor to obtain cobalt. The complaint also cites Glencore. She posits that these tech companies should be aware of the use of forced child labor in the cobalt mines operated by the Swiss-based company and others.

In response, several electric car and battery companies threatened to stop supplies to the DRC. Others completely exclude cobalt from artisanal mines from their supply chain. And some are even stricter in managing the risks associated with cobalt production.

In 2020, Tesla signed a deal with Glencore – the world’s largest cobalt producer, which operates two mines in the DRC. It covers 6,000 tons of the metal that must meet Tesla’s “social and environmental standards”. In August, the same Glencore made further deals with electric car maker Britisvolt and a Norwegian battery maker. Glencore is committed to providing them with “ethically produced cobalt”.

diverging opinions

Glencore and Trafigura are benefiting greatly from the growing demand for cobalt. And that kind of deal has led them to invest massively in developing traceable and responsible sourcing. But the different paths taken underline the difficulty of changing the situation.

Glencore clearly separates artisanal and industrial production. The company excludes any use of small-scale artisanal mining in the DRC. The stakes are very high when Glencore is a world leader in the cobalt area, its spokeswoman Sarah Antenore tells SWI

The company invests to improve the situation of small-scale mining through the Fair Cobalt Alliance. It brings together different partners in the value chain to improve working conditions and eradicate child labour.

Trafigura, which owns the rights to trade and sell all of the cobalt mined by Chemaf (RDC), is taking another approach. This year, it signed an agreement providing for the purchase of cobalt from small-scale artisanal mining with the General Cobalt Company (EGC). The latter was launched in March by the DRC government. It must buy, process and sell all ASM cobalt in the country.

Responsible for Trafigura’s corporate responsibility, James Nicholson gave his position at the recent Antaike Battery Metals Conference. It is “illogical and counterproductive to exclude small-scale artisanal mining from cobalt production,” he said.

In partnership with several NGOs, Trafigura defines artisanal mining zones that include social and environmental controls based on EGC’s responsible sourcing standards. The signed agreementexternal link with the EGC also foresees a great effort in terms of traceability – in particular the use of special tamper-evident bags and the use of blockchain.

On the one hand, companies invest. But several NGOs and experts are concerned about the lack of generalized industry-wide standards. Tools that would make companies accountable for their actions.

“The fact that there are two or more theories on how to improve the situation of responsible sourcing of cobalt ASM in the DRC demonstrates that the industry is not fully aligned. And that it is not fully involved in improving the situation in this country”, Judge Dorothée Baumann-Pauly. Director of the Geneva Center for Business and Human Rights, she has worked with the Global Battery Alliance and its members towards a common standard for the responsible sourcing of cobalt ASM.

great opportunities

Despite the progress made by Glencore and Trafigura, the commodities industry still lags behind many other sectors in addressing the risks inherent in its supply chain. According to a recent study (pdfexternal link) of the Responsible Mining Foundation, covering 25 companies in the sector, only 23% of them implemented a socio-environmental due diligence policy. Even fewer provide transparency into supplier compliance.

In Bern, the Swiss government sought to regulate the sector. But it is often accepted that purely voluntary guidelines have little effect. Hence the calls for a duty of diligence imposed on companies (a popular initiative “for responsible companies”). An idea narrowly rejected at the polls last November.

There is still a long way to go, believes Dorothée Baumann-Pauly. Some companies develop tracking projects for specific commodities, but most are unable to map their supply chains back to the source. “Supply chain transparency expectations will only grow in the future. The commodity trading industry understands these expectations, but is not yet ready to meet them.”

Betting on the search for decarbonization metals is a guarantee of immense opportunities, assures Gerard Reid, a former investment banker and current advisor to companies active in renewable energy with Alexa Capital. To develop the sector, the lever may be there, he says. This is all the more true as European companies tend to turn to suppliers outside China, which controls a growing share of mineral markets. Beijing already processes about 90% of the cobalt and accumulates stakes in large mining projects involving nickel, zinc and copper.

Traders’ expectations are very real in terms of fighting corruption, monitoring CO2 emissions and protecting labor rights. “They need to be more transparent,” argues Gerard Reid. This is what is required today. Otherwise, customers will go elsewhere.”

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