OPINION: Car companies face a chip problem. Soon China will hand them a cobalt problem that might trigger radical ownership moves – by Eric Reguly (Globe and Mail – April 17, 2021)


U.S. President Joe Biden found out the hard way that supply chain obstacles are bad news for Corporate America. He moved fast to hand US$50-billion to the U.S. semiconductor industry after chip shortages began to shut down auto production.

The chip glitch was a wake-up call for car companies, which had been spoiled by the endless supply of everything they needed to keep their assembly lines rolling – steel, aluminum, copper, rubber, glass, plastic, electronics. Even when their purchasing managers squeezed prices, the supplies kept coming. America the bountiful!

What Mr. Biden and automakers may not fully realize is that the chip shortage may just be the start of their supply problems. That’s because all the auto biggies are converting their fleets to electric power, which essentially means they are becoming battery companies. The economic and strategic risks of this move are enormous.

Since cobalt is an essential component of lithium-ion batteries, automakers will become beholden to the Democratic Republic of the Congo (DRC), where 75 per cent of the world’s cobalt is mined, and to the Chinese mining companies that dominate the metal’s production in that country.

Switzerland’s Glencore may be the single biggest cobalt miner in the DRC, but it is the Chinese companies that are coming on strong and seem intent on taking over the global cobalt industry.

For the rest of this article: https://www.theglobeandmail.com/business/international-business/article-car-companies-face-a-chip-problem-soon-china-will-hand-them-a-cobalt/