Tag: Congo

OM in the News: U.S. Takes On Cobalt’s ‘Inconvenient Truth’

Each chapter of our text ends with an Ethical Dilemma, asking students to consider a difficult management decision. Such is the role of OM executives. And we see the issue arise again in the Congo. The Wall Street Journal (Aug. 25, 2023) writes: “The U.S. is turning to a much-criticized source as it races to secure supplies of battery metals to meet the growing demand for electric vehicles. “

To do so, it is homing in on cobalt from the Democratic Republic of Congo’s informal mining sector (called “artisanal mines”), where miners, including children, often work with no safety equipment in dangerous, hand-dug mines. Congo supplies around 70% of the world’s cobalt, a key metal in the lithium-ion batteries used in EVs, with 1/3 of that coming from these mines.

Workers wash ore in an artisanal copper-cobalt mine in the Congo

The focus on artisanal mines, long shunned by the West, comes as governments and companies increase efforts to secure greater supplies of battery metals—an area China dominates. China just set export restrictions on two minerals the U.S. says are critical to the production of semiconductors, highlighting the risk of relying on Chinese supplies. Chinese companies have a tight grip on Congo’s cobalt mining industry, refining 3/4 of the world’s cobalt supply and producing about 70% of the world’s lithium-ion batteries.

Unlike metals from major mines, cobalt from artisanal mines isn’t contracted to any particular company. Instead, miners sell their ore to local traders who in turn sell it on to exporting companies and refineries in the global supply chain. As a result, Western companies have faced criticism from consumers disturbed by the link to workers toiling in dangerous conditions in one of the planet’s most impoverished countries.

Hundreds of thousands of people work in Congo’s artisanal-mining sector, far outnumbering jobs at established mines, where the use of heavy machinery means fewer workers are needed. Artisanal cobalt is an “inconvenient truth,” says a Swiss human rights director, since it is nearly impossible to separate artisanally mined cobalt from the larger supply of industrially mined cobalt.

Classroom discussion questions:

  1. State the “ethical dilemma” and propose a solution.
  2. What is the status of mining in the U.S. and other nations for cobalt and other “rare earths” and minerals needed for electric vehicles?

OM in the News: Blockchain and Strategic Mineral Supply Chains

Congo mines are in the hands of rebels at times

Ford, Huayou Cobalt, IBM, LG Chem and RCS Global are beginning to use blockchain technology to trace and validate ethically sourced minerals, reports Mining Review (Jan. 16, 2019). The group, which includes participants at each major stage of the supply chain from mine to end-user, will begin with cobalt in exploring an open, industrywide blockchain platform that could ultimately be used to trace and validate a range of minerals used in consumer products.

Cobalt is in high demand for its use in lithium-ion batteries, which power a wide range of products such as laptops, mobile devices and electric vehicles. By 2026, demand is expected to multiply eightfold. The typical electric car battery requires up to 20 pounds of cobalt and a laptop requires an ounce of the mineral.

Cobalt produced at Huayou’s industrial mine site in the Democratic Republic of Congo will be traced through the supply chain as it travels from mine and smelter to LG Chem’s cathode plant and battery plant in South Korea, and finally into a Ford plant in the U.S. An audit trail will be created on the blockchain, which will include data to provide evidence of the cobalt production from mine to end manufacturer. An important objective is to help increase transparency in small-scale mining and enable these operators to sell their raw materials in the global market, while they meet their internationally ratified responsibility requirements.

Built on the IBM Blockchain Platform, the platform is designed to be adopted across industry and to allow parties of all sizes and roles in the supply chain easy access, including manufacturers across the automotive, electronics, aerospace and defense industries and their supply chain partners such as mining companies and battery manufacturers. Work is expected to be extended beyond cobalt into other battery metals and raw materials, including minerals such as tantalum, tin, tungsten and gold, which are sometimes called conflict minerals, as well as rare earths.

Classroom discussion questions:

  1. Why is blockchain an important OM tool?
  2. What other products are experimenting with or using blockchain?

OM in the News: Cobalt Mines, Supply Chains, and Ethics

Mine workers, move rocks containing cobalt in Kolwezi, Congo

Dozens of global manufacturers found themselves on the defense when Amnesty International reported that the cobalt in some of their batteries was dug up by Congolese miners and children under inhumane conditions, reports The Wall Street Journal (Sept. 13, 2018). Many of the companies said they would audit their suppliers and send teams to Congo to fix the problem. But at a Chemaf-owned cobalt mine in Kolwezi, Congolese workers could be seen descending underground without helmets, shoes or safety equipment. The mine’s owner is part of the global cobalt supply chain for companies including Apple and VW.

Miners there were using picks, shovels and bare hands to unearth rocks rich with the metal. Water sometimes rushes into holes and drowns miners, and an earth mover buried one alive last year. “Of course, people die,” said the mine’s owner’s CEO. “This is really shitty work.” He called the miners “barbarians” and said Chemaf had resisted giving them safety equipment because they would sell it. “I don’t care about supply-chain problems,” he added. “That’s a problem for Apple and Samsung.”

Global demand is soaring for cobalt, which is used to conduct heat in lithium-ion batteries in products from smartphones to electric vehicles. Cobalt prices have more than doubled since 2016, putting Congo in the spotlight. It isn’t easy for global manufacturers to trace cobalt’s source in Congo, because it passes through multiple companies and countries. Some mining operations mix industrially produced and hand-dug cobalt. Samsung says it is aware some of the cobalt it gets from Chemaf is produced by the miners. If companies stopped buying it, said Samsung, it would put people out of work.

Amnesty recently applauded Apple’s moves to weed out child labor from its supply chain, saying it is “the industry leader when it comes to responsible cobalt sourcing.” Amnesty said VW hadn’t addressed whether certain companies in its supply chain received cobalt from Congo. Its report added: “Some of the richest and most powerful companies are still making excuses for not investigating their supply chains.”

Classroom discussion questions:

  1. Why is this a complex OM issue?
  2. Why is cobalt so important to supply chains?

OM in the News: The “Conflict Minerals” Supply Chain Dilemma

A gold miner digging at an open pit at a mine in the Congo. The Dodd-Frank Act requires companies to disclose whether conflict minerals in their supply chains are connected to violent militia groups in the country.
A gold miner digging at an open pit at a mine in the Congo. The Dodd-Frank Act requires companies to disclose whether conflict minerals in their supply chains are connected to violent militia groups in the country.

“Hundreds of U.S. companies are coming up short as they face a deadline to reveal whether their supply chains contain even trace amounts of minerals linked to violence in Africa”, writes The Wall Street Journal (Aug. 4, 2015). The finding illustrates the challenges companies face in keeping tabs on all of the players and materials in their global supply chains. In all, companies shelled out roughly $709 million and 6 million staff hours last year to comply with rules to disclose “conflict minerals” in their supply chains. And next year, they will need to hire auditors to evaluate their results.

“Conflict minerals” include tin, tantalum, tungsten and gold originating from the Democratic Republic of the Congo. That country holds vast reserves of these 4 minerals, which are widely used in a flurry of products, from electronic devices to engagement rings to auto parts.

But tracking materials from more than 2 million miners in the Eastern Congo that smelt small amounts of metals—and determining their links to guerrilla operations—is like trying to “apply modern supply-chain logistics to the 1849 California gold rush,” said one consultant. To track the origin of tantalum, companies often have to dig 4 or 5 layers deep into their supply chains, as the material travels across the globe to various parts manufacturers.

Only 314 companies, or fewer than 24% of the total, reached full compliance with the law. The U.S. Commerce Department was supposed to publish a world-wide list of refiners and smelters that are being used to fund militia groups, but it said in September that the task was impossible.

Classroom discussion questions:

  1. Why are “conflict minerals”, sometimes also called “rare earths”, so important to manufacturers?
  2. What is the supply chain issue being faced by managers?

OM in the News: Troubleshooting Intel’s Supply Chain in the Congo

congo minesAmerican manufacturers have for years been under pressure from Congress to avoid buying “rare earths” and minerals from rebel held mines in the Congo. Government commanders and rebel ­militias in the Democratic Republic of the Congo earn about $185 million annually through the illicit trade of gold and so-called 3T minerals (tin, tantalum, and tungsten)—crucial ­elements in consumer electronics such as cell phones and tablets. The revenue has financed a brutal ongoing conflict resulting in the deaths of millions of innocent people. Intel no longer wanted to contribute to an economy of suffering. Just recently, reports FastCompany (April, 2015), Intel became the first company to build microprocessors entirely from conflict-free minerals.

But controlling the supply chain process at Intel was not at all simple. Identifying how conflict minerals entered its supply chain was key to eliminating them. Smelting plants, where raw ore is refined, offered one place to trace the origin of minerals, if only the facilities would comply with a transparent auditing process.

Over five years, Intel’s supply chain director, Carolyn Duran, and her team visited 91 smelters in 21 countries, using Intel’s purchasing power to put pressure on smelters to develop and implement an auditing system to track minerals so corporate buyers can source responsibly. The result: Nearly half the world’s 3T and gold smelters have now passed conflict-free audits, shrinking the market for illegally traded minerals and reducing warlords’ profits. Intel hopes to be able to declare its entire product line conflict-free by 2016, inspiring other firms to do the same.

Classroom discussion questions:

1. Why are rare earths critical to the supply chain and which countries supply them?

2. Why did Intel try to set this precedent?

OM in the News: Complexity of the African Supply Chain

While the aftermath of the Japanese earthquake is causing many companies to worry about the auto and electronics supply chains, a different pall is hanging over a supply chain in the Democratic Republic of the Congo. The substance in question is a rare earth metal called tantalum, and the Congo is the world’s 3rd largest producer of this ingredient key to smartphones, tablets, and computers. The Wall Street Journal (April 27,2011) reports that Intel, AT&T, H-P, and other big technology companies are caught in a new SEC rule that requires them to report if  their supply chain includes tantalum coming  from war-torn regions of Africa. Key minerals, according to the law, cannot come from the Congo’s rebel-controlled mines.

I have to admit that I did not know much about such “rare earths” until we blogged about neodymium . At that time China cut its exports of that metal by 3/4 to save supplies for its own electronics manufacturers. China makes 97% of the world’s neodymium, dysprosium, and didymium.

The complex African supply chain means that US companies don’t really know who they are buying from. They purchase finished products through suppliers that source from smelters,which in turn buy from traders on the ground. Intel, Dell, TriQuint, AT&T, and Microsoft are all scrambling to work with suppliers to track the minerals. AT&T, hoping for an exemption,  estimates it would have to wade through 35 manufacturers, 60-80 parts suppliers, 1,060 commodity-part suppliers, and an unknown number of brokers and distributors to get to the mine that is the source of its tantalum.

Just as Ford recently discovered that a 3rd tier supplier in Japan was the sole source for 3 paint pigments for its autos, manufacturers around the world are finding that complex supply chains are an OM function that needs to be monitored and managed.

Discussion questions:

1. Why is it so difficult to manage global supply chains such as this one in the Congo?

2. What alternatives do manufacturers have in replacing rare earth suppliers?