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Goldman Sachs has stepped up its trade in battery cobalt metal by sticking to one of the hottest corners of the commodity market as motorists switch to electric vehicles.
The bank has been active in the cobalt markets since last year, and has recently plunged into physical purchases of the metal for the first time, according to people familiar with the subject.
The involvement of banks like Goldman can lead to liquidity in the cobalt trade, an opaque market where prices are determined privately between buyers and sellers.
Machinery needs metals like lithium and cobalt for batteries, and others directly from the source at the hands of the miners. But they can have painful price fluctuations.
Already, the price of lithium carbonate has risen 65% this year and the price of cobalt sulfate has risen 24%, according to Benchmark Mineral Intelligence.
Prices are likely to continue to rise rapidly. To meet the goals of the Paris climate agreement, cobalt demand is projected to increase by twenty times by 2040. according to To the International Energy Agency.
At the moment, motorists cannot easily cover their exposure to metals such as cobalt battery, as there is little trade in exchanges such as the London Metal Exchange. Due to concerns about the origin of some of the physical cobalt in LME deposits, they may be linked to child labor in the Democratic Republic of Congo.
The CME Group is working to get liquidity in the cobalt contract that Comex’s exchange in New York launched in December. “Every contract needs time to build,” he said.
Goldman, meanwhile, offered coating products to automakers while maintaining the physical cobalt that covered its exposure, said people familiar with its operations. The bank declined to comment.
The CME exchange launched the future of lithium for the first time last month, while the LME will begin trading in lithium this year.
Goldman joined the LME cobalt committee in March 2020, the first bank to be a member. Tesla’s electric car manufacturer is also a member of the committee.
The bank has become a key investor in the transition to electric cars. It invest about $ 1 billion this week from Swedish battery company Northvolt as part of a $ 2.75 billion funding round.
Goldman has a long career in the commodity trade since it was taken over by J Aron & Co in 1981. Former CEO Lloyd Blankfein was promoted through the raw materials division.
In recent years, however, it has reduced some physical raw material business.
In 2014, the Metro International Trade Service sold the warehouse operator after a U.S. Senate subcommittee complained that it had helped raise aluminum prices by mixing metal among the warehouses – the bank denied the allegations.
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