London (Reuters) - Glencore Plc is in advanced talks to support a lithium project being developed by French mining company Eramet SA in Argentina in exchange for future supplies of the key battery ingredient.
The commodities giant will sign an offtake agreement to help finance the lithium processing plant being built by Eramet and China's Tsingshan Holding Group Co., according to people familiar with the matter. The people spoke on the condition of anonymity because the information is not public.
The Argentine plant is one of a series of new projects being developed around the world to meet the growing demand for lithium. The metal, which is crucial to the shift to electric vehicles, will face tight supply by the end of the century. While the sale of lithium in this relatively small market has historically been through bilateral long-term agreements between producers and customers, commodity traders such as Glencore have begun looking to build lithium businesses.
It is unclear how much Glencore will invest and how much lithium it will receive from the off-take agreement.
A Glencore spokesman declined to comment. Eramet said it had received interest from several potential partners, including Glencore, and "negotiations are continuing to determine which offer is in the best interests of the company."
As one of the world's largest commodities traders, Glencore regularly signs deals with producers to provide them with some or all of their future supplies and trades them alongside production from Glencore's own sprawling business.
The company does not mine any lithium, but it produces the material in its recycling business and hopes to grow in the lithium trade. Chief Executive Gary Nagle said in December that the firm had set up a desk of two or three traders.
At the same time, automakers such as Ford Motor Co. and General Motors Co. are stepping up efforts to secure future lithium supplies, including striking direct deals with miners, a change from their tradition of typically buying auto parts or signing long-term contracts for raw materials at fixed prices.
Eramet is working with China's Tsingshan, the world's largest producer of nickel and stainless steel, to build a 24,000-tonne-per-year lithium processing plant.
The project, estimated to cost more than 700 million euros ($763 million), is expected to start production in the second quarter of next year and be fully operational by mid-2025, Eramet said in a presentation in May. The French company and its Chinese partners plan to decide later this year whether to triple the plant's capacity.
