Umicore shows sound results, calls for ethical cobalt label
Umicore’s stock market value is rising again after the hit it took in April. The Belgian raw material supplier’s half-year results were better than expected. But the company remains prudent about future financial results. Especially the unstable automotive market, Umicore’s main outlet, and waning growth for electric car cathodes are question marks.
Meanwhile, Umicore says unethically sourced cobalt is an unfair competition. Besides harming the environment and workers in unsafe cobalt mines, ‘dirty’ cobalt also has an impact on Umicore’s financial results, since the company refuses to use the cheaper unethical cobalt. Umicore calls for an ‘ethical cobalt’ label.
Financial results – the good
Umicore’s catalyst department’s performance was excellent. It accounts for 44% of the company’s turnover and a third of its profits. It is expected to keep growing. The recycling department also did well. While a fire in the Hoboken recycling plant will cost roughly 10 million euros, extra investments have meant a higher volume can be recycled. Recycling represents 29% of turnover and 19% of profits.
Financial results – the bad
The ‘Energy and Surface Technologies’ department didn’t perform that well. It uses nickel, manganese, and cobalt to make alloys for electric car battery production. Electric car sales are slowing down, especially in top market China, where electric car incentives have been slashed. In the long term, Grynberg expects the market to remain at a healthy level, especially given the CO2 limits for cars in Europe. Car manufacturers need to sell electric vehicles to attain those levels. But for now, Umicore turnover and profits in this department are lower than last year.
Last year, Umicore decided to invest 660 million euros in production facilities for battery materials in Poland and China. But now, prognoses of cathode material and production capacity are postponed for a year to a year and a half. “There is more Chinese competition in the battery materials market. That has an impact on the price, but in the long term we will do well,” says Grynberg.
Recently, London analysts said that by 2024, there will be overcapacity in battery materials. Grynberg disagrees. “Many analysts mistake the announced production for actual production. There is a slight overproduction, but don’t forget that the development of the electric car is still ramping up, certainly in Europe.”
Unethical Cobalt – the ugly
Umicore guarantees it does not use unethically sourced cobalt for manufacturing its cathodes. Competitors don’t always do the same and sometimes use cobalt from ‘artisanal’ mines in Congo, where child labor and disrespect for human and environmental laws are not an exception. Unethically sourced cobalt represents 20% of the cobalt market, and it is cheaper. By not using it, Umicore makes 10 to 15 million euros less profit.
Grynberg calls the methods used to extract cobalt in the unregulated mines shocking and scandalous. He feels that action should be taken against unethically sourced cobalt. The minimum is a label for ethically sourced cobalt and an organism that certifies the whole chain. But because the final customer, manufacturers of electronics or cars, don’t seem interested, according to Grynberg, because it will make their batteries more expensive.
Grynberg feels this is not a valid reason, even if you only look at the cost. “For a smartphone, the extra cost is a few cents for something that costs a few hundred euros. In a car, it could cost tens or hundreds of euros more, but I don’t think that is a problem. People that buy electric cars have an environmental consciousness. They don’t do it for reasons of the economy because electric cars are more expensive to buy. They will pay more to have the guarantee that the battery has been produced in respectful conditions.”
Umicore recently bought Europe’s biggest cobalt refinery in Kokkola, Finland, and signed a long-term deal with mining group Glencore to deliver ‘clean’ cobalt. According to Umicore, this will reinforce its European integrated value chain, but also guarantee a 100% clean and durable cobalt sourcing.