
Apple in Talks to Buy Cobalt Directly from Miners - lnguyen
https://www.bloomberg.com/news/articles/2018-02-21/apple-is-said-to-negotiate-buying-cobalt-direct-from-miners
======
bigtones
Apple actually does this with a few different commodities. It sources
Aluminium directly from mines and smelters in Australia [1], and prefers these
type of deals over buying materials on dubious secondary markets like it is
forced to do for Tantalum for batteries [2]. Before he became CEO, Tim Cook
ran the entire supply chain for Apple and before that for HP/Compaq and he
became a master of doing big deals to lock up global materials supplies to
make it much harder for competitors to compete [3]. As a consequence Apple is
known to have one of the most efficient large scale supply chains in tech.

[1] [https://www.businessinsider.com.au/how-apple-forced-
microsof...](https://www.businessinsider.com.au/how-apple-forced-microsoft-to-
build-a-tablet-2012-6)

[2] [http://www.newsweek.com/2015/02/13/where-apple-gets-
tantalum...](http://www.newsweek.com/2015/02/13/where-apple-gets-tantalum-
your-iphone-304351.html)

[3] [http://fortune.com/2009/02/19/report-apple-has-cornered-
the-...](http://fortune.com/2009/02/19/report-apple-has-cornered-the-flash-
memory-market/)

~~~
ksec
You kind of expect, with their possibly the best supply chain teams and
economy of scale, Apple will be getting some advantage over other players.
Example they are possibly the largest NAND and DRAM purchasers, and yet it
doesn't seems to be reflected in their product. I.e the NAND prices for Apple
should be cheaper then say Lenovo, HP or Dell.

I have had the same theory about Apple's diseconomies of scale long before
Gruber publish it [1], although we may have no way to prove it, this Cobalt
story may just be another example. Apple are willing to pay a premium for it,
as long as the supply is stable.

[1]
[https://daringfireball.net/linked/2017/07/17/iphone-2017-sne...](https://daringfireball.net/linked/2017/07/17/iphone-2017-snell)

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wyldfire
This seems less about scarcity and more about Apple protecting their brand.

> ...child labor is still used in parts of the mining industry.

> ...Apple has stepped up its engagement with cobalt suppliers after the
> origin of the metal in its supply chain came under scrutiny from human
> rights groups.

A great many of Apple's customers care a lot about this kind of thing. Also,
Apple may genuinely feel like they're obligated to be a leader in this area.

~~~
roenxi
I'm not saying it doesn't happen, because it probably does, but it would be a
surprise to me if using child labour is really cost competitive. I'd expect a
couple of small and desperate suppliers. Do you have a link handy?

Mining for bulk materials (iron ore, coal, copper, aggregates, etc) is going
to be 100% mechanised at the scale that big buyers are interested in. If
cobalt is still mined by the vein then maybe child laborers get used because
they are smaller, but as battery production is getting serious child labour
just won't work.

Take gold; you couldn't supply gold to a bullion bank with child labour
because they do not produce fast enough. Big gold suppliers are happy with an
orebody with grades measured in parts per million, and child cannot move a
tonne of dirt as quickly, cheaply or consistently as a machine.

~~~
XR0CSWV3h3kZWg
> Mining for bulk materials (iron ore, coal, copper, aggregates, etc) is going
> to be 100% mechanised at the scale that big buyers are interested in.

Why do you assume that? It seems to be not the case for cobalt:
[https://www.washingtonpost.com/graphics/business/batteries/c...](https://www.washingtonpost.com/graphics/business/batteries/congo-
cobalt-mining-for-lithium-ion-battery/)

Mechanization makes sense in much of the world because there is a high up
front cost, but the ongoing costs are dominated by energy and maintenance
costs. If those costs are higher than the general labor cost then why would
you mechanize?

Congo has been dominated by civil war for a long time, that generally
depresses the cost of labor.

~~~
roenxi
> Why do you assume that?

I'm a mining engineer. If a western company has a choice between using manual
labour and mechanised they will choose mechanised because it is cheaper,
faster and more reliable. They don't care what the law is, because human
mining is barely competitive even at small scales.

Yes, it is a fact that there is child labour is used in some third world
mines. I'm observing that it doesn't make sense to me that it is large-scale,
because it only makes sense if the margins are huge, the volumes physically
small and if there is an impoverished workforce.

If Apple is going to negotiate with someone directly, it doesn't make sense to
me that that someone using child labour, because purely economically they
shouldn't be cost effective. They would be a marginal, higher-cost producer.
Isn't there a more cost-effective producer that Apple could negotiate with?

If there is a situation where human labour is cost effective at a scale Apple
finds interesting, I am professionally curious because I didn't expect it to
be possible. Hence a request for links. Even before negotiating, are their
suppliers of serious quantities of cobalt that use human labour?

------
tyfon
Maybe it's time to reopen the cobalt mines close by here [1]. Today it's a
museum but at one point it supplied 80% of the worlds cobalt needs, mainly for
colouring.

I wonder at what price level it would become profitable again. It was closed
in 1898.

[1][https://en.wikipedia.org/wiki/Blaafarvev%C3%A6rket](https://en.wikipedia.org/wiki/Blaafarvev%C3%A6rket)

~~~
greglindahl
Long-term contracts are one of the better ways to encourage new supplies.
There are a couple of new lithium mines in the US/Mexico which opened after
signing contracts with Tesla.

Cobalt is a small enough % of the price of things that use LiIon batteries
that it's a good candidate for paying extra to ensure a reliable, non-
conflict-area source.

------
coolspot
Poor Gorillas.

Their habitat is threatened by rare metal miners in Congo.

It was already bad without electric cars, just with phone battery demand.

[42] [http://www.wired.co.uk/article/grauers-gorillas-bushmeat-
con...](http://www.wired.co.uk/article/grauers-gorillas-bushmeat-conflict-
minerals-technology)

[64] [http://www.mining.com/illegal-mining-in-congo-wiping-out-
gor...](http://www.mining.com/illegal-mining-in-congo-wiping-out-gorilla-
populations/)

------
yeasayer
Where are these new battery technologies that are invented every 6 months,
according to the news?

~~~
kilo_bravo_3
They are in your phone.

10 years ago it was almost impossible to find a phone with a battery of over
1500 mAh. Today the standard size is 3000 mAh.

While the capacity has doubled, the volume of the battery has stayed the same
or diminished.

There are phones with 5000, 6000, and even 10000 mAh batteries on the market
today.

That's how I know that everyone complaining about thinner phones and reduced
battery life is kidding themselves.

Thinphones are the top sellers, thickphones with batteries that last for days
are not.

~~~
awalton
> thickphones with batteries that last for days are not.

Point me to a recent one with a recent build of Android that receives regular
security updates from a reputable builder and I'll buy it immediately. I'd
line up outside a building like it was Black Friday to buy a Galaxy 8 or Pixel
2 with an integrated 10000mAh battery.

But, alas, this magical unicorn "thickphone" doesn't exist on the market, even
if some random Chinese manufacturer that will be gone tomorrow makes one with
a four year old SoC and a three year old build of Android with no security
updates since the phone's release two years ago...

~~~
koverstreet
lg v20 with an aftermarket battery. I regularly go three days without
charging.

------
elhudy
Which cobalt mining companies in particular is Apple engaging with? Any on the
NYSE?

~~~
cdibona
I'd guess Nevada Sunrise. Get to em before Tesla does...

------
baldfat
This is scary and shows the growth of electric cars might not scale. The
world's richest company, Apple, is buying up supplies of a dwindling resource
that anything that uses a battery needs. This is the boost for others to
research other car technology or a new battery that is always 10 years away
for the last 20 years.

~~~
rmm
Mining guy. Don’t be scared there is plenty of cobalt. HPAL tech has come a
long way and plenty of laterite Ni-Co around the place. Lots of it close to
the surface too.

I’m working on with a couple of companies already reviewing old drill cores
for Co.

~~~
jseliger
_Mining guy. Don’t be scared there is plenty of cobalt_

Recycling could also easily kick into gear if/when prices rise high enough.
See one of my favorite recent books, _Junkyard Planet_ , for more:
[https://www.theguardian.com/books/2014/jan/18/junkyard-
plane...](https://www.theguardian.com/books/2014/jan/18/junkyard-planet-adam-
minter-review)

Right now, many people don't bother recycling older phones and laptops because
they can't get any money for them. If/when prices go high enough, we'll see
recycling kick into high gear. The day you see Best Buy advertise "$10 for any
phone!", you'll know we're actually seeing a sustained price rise.

~~~
baldfat
Actually, it cost money in my city to throw away any electronic item. So
either you pay for it to get thrown away on "Electronic Trash Day" or you hide
it in the trash.

------
da_chicken
I don't see how this helps with the child labor problem that they were
criticized for by Amnesty International. How do you "buy directly from the
miners" and verify that the miners are actually the miners doing the work? I
mean, is Apple going to send people into the mine to buy the ore as it falls
from the pick?

~~~
dpkonofa
No, but they will have unscheduled and unannounced visits to the mines to
ensure that the workers there are not children. Unless the mining company
somehow has a mole working inside the company, it'll be hard to react that
quickly to a surprise visit. That's what they do with their other suppliers
that they have direct connections to. They're attempting the same with Foxconn
and, supposedly, it's improved the conditions for those workers significantly.

