By Pratima Desai and Polina Devitt
LONDON/MOSCOW (Reuters) - Commodity trading firm Traxys has agreed to market large amounts of Norilsk Nickel's production of battery metal cobalt for up to three years, effective immediately, three sources familiar with the matter said.
Cobalt is a key component of the lithium-ion rechargeable batteries that power electric vehicles, a segment of the auto industry expected to grow exponentially in coming years as governments and consumers look to cut their carbon footprint.
Demand for cobalt is expected to rise along with electric vehicle sales, leaving battery makers and other consumers scrambling for material and facing shortages within a few years.
Russia's Nornickel produces about 5,000 tonnes of cobalt a year as a byproduct of nickel, making it a top-10 producing company accounting for nearly 4% of global supplies estimated at 135,000 tonnes this year.
One source said Traxys would take all Nornickel's cobalt metal and hydroxide.
"Traxys will market a sizeable chunk of Nornickel's cobalt output for two to three years," another source familiar with the matter said. "Traxys' deal with Vale ends next year. Traxys needed a new cobalt partner."
Traxys did not respond to requests for comment.
Brazilian miner Vale (SA:VALE3) has made alternative arrangements to sell its cobalt output from 2021.
Nornickel last year agreed to supply cobalt sulphate and nickel to German chemicals giant BASF (DE:BASFn).
"Not a single one of our contracts can affect any other contract. We do not have exclusivity in our relationship with any of our counterparts," Nornickel told Reuters, when asked whether it had signed the contract with Traxys and whether the contract would affect the deal with BASF.
"As a general rule, we do not disclose the terms of concluded or planned deals, this is done in exceptional cases, in the form of a joint statement," Nornickel added. It declined to comment further.
BASF is building a factory to make cathode materials for electric-car batteries in Finland, close to Nornickel's nickel and cobalt refinery, which supplies raw materials to the project.
One source said the Traxys contract was for a couple of years and would not affect Nornickel's relationship with BASF. "There is enough cobalt for every customer."
Russia is the world's second-largest cobalt producer after the Democratic Republic of Congo. Nornickel is Russia's only cobalt producer.
Estimates of the cobalt amounts to be used for electric vehicle lithium-ion rechargeable batteries range between 20% and 45% of the total for this year.
Demand from the electric vehicle sector is set to rise in coming years. Forecasts typically fall between 30% and 60% of the global total estimated at 200,000 tonnes by 2023.