Letter from the editor: The canary in the cobalt mine

A parking lot with employees vehicles at the Ford assembly plant in Oakville, Ont. in March 2020. The Canadian Press/Nathan Denette

At an October 8 news conference in Oakville, Prime Minister Justin Trudeau, Ontario premier Doug Ford and Unifor Canada president Jerry Dias were on hand to announce an agreement that will see Ford, one of the Big Three North American automakers, rebuild its last remaining Canadian auto plant into an electric-vehicle assembly line. The auto company was represented only by its Canadian head, Dean Stoneley. New CEO Jim Farley, who’d assumed the role just seven days earlier, was MIA.

Farley’s absence seemed odd, given that the deal was his first bold move as chief executive and that, according to Dias, the new CEO was instrumental in getting the deal done. “Jim Farley understood the importance of Oakville,” the union leader told the Detroit Free Press shortly after the agreement was first announced. “He’s taking over. This is his baby.”

Upon reflection, however, one can appreciate why the new CEO kept a low profile. Less than a month from the U.S. presidential election, perhaps he thought it best not to upset the current occupant of the White House in the home stretch of a campaign that counts Michigan as a swing state, one where auto manufacturing is a massive job creator.

If that’s the case, why strike a deal with Canada just weeks before the election?

Read this article for free

By entering your e-mail you consent to receiving commercial electronic messages from The Logic Inc. containing news, updates, offers or promotions about The Logic Inc.’s products and services. You can withdraw your consent at anytime. Please refer to our privacy policy or contact us for more details.

Already a subscriber?

On the other side of the ticket, a Biden presidency would likely offer large incentives for electric vehicle production. The former vice-president has proposed creating a network of 500,000 charging stations, offering rebates for those looking to swap out older vehicles for newer, fuel-efficient ones, and suggesting as recently as Thursday night’s debate that he would transition away from oil in favour of renewable resources.

Ford officials declined to speak with me. But according to a senior Ontario government official whom I’ve agreed not to name because they aren’t authorized to speak publicly, getting the deal done ahead of the U.S. election was critical and required a joint effort from the province and the federal government dating back to early 2019.

Things weren’t looking good for the Oakville plant as recently as this summer, when a leading automotive analyst reported it was in dire jeopardy. But in a show of political unity, the Ontario Progressive Conservatives and the federal Liberals worked together to convince the auto manufacturer that Canada was especially positioned to set up shop for electric-vehicle production.

To succeed, they had to make the case that, in the midst of a global trade war with supply chains in a constant state of uncertainty, Canada’s vast auto-manufacturing and natural-resources know-how meant the country had the potential to own the entire electric-vehicle supply chain. 

“There’s this fascinating opportunity now available to us that harnesses the fact you’ve got a big domestic auto sector, and you leverage the fact that in the north of the province, there’s a major resource—and all on the doorstep of the biggest potential customers.” the source said. 

If Ford was going to make its first electric-vehicle bet not in the U.S. but in Canada, no wonder its CEO went into hiding. 

To understand Canada’s opportunity, it helps to walk through the supply chain of building an electric battery.

Illustration by Hanna Lee, Courtesy: First Cobalt

First, there’s the mining of cobalt, lithium, nickel and other raw materials. Tesla CEO Elon Musk talks about the importance of his company controlling its own North American supply; Canada has a tremendous amount of cobalt and lithium potential in Ontario and Quebec, and its nickel deposits are already well known. 

Then there’s the refining of these minerals—and Canadian companies are already building those facilities. 

The raw materials then have to be processed into the components of the battery, and ultimately, the battery cell itself. Dominating those markets are China’s CATL, South Korea’s LG Chem and Samsung, and Japan’s Panasonic. The final step—the installation of the batteries—is where the Ford Oakville plant comes in. 

Raw-material processing and battery cell manufacturing are the steps where Canada currently falls short. And while Ford’s endorsement of the country’s potential is a positive, if we don’t forge the other links in the chain, it could all be for naught.

“There’s a good chance that the cobalt we’re going to be making [in Canada] is going to make its way to Korea or somewhere in Europe in order to be put into a cathode plant and into a cell,” Trent Mell, CEO of Canadian mining company First Cobalt, told me this week.  

Mell argues that for an additional $150 million—not a lot of money relative to the almost $2 billion invested in the Oakville plant—Canada can take the final step needed to control its entire supply chain. 

“You get the cathode plant, and that taxpayer investment in Ford becomes a lot more sticky.” 

Sticky because Canada could build an entire electric battery from scratch within our borders.

According to the provincial government source, all levels of government are aware of the opportunity and are committed to seeing it through.

“You’ve got a moment where the U.S. is looking for a stable secure supply of rare-earth resources. There’s an interest in understanding how Ontario, Quebec, and Canada actually [become] where those raw materials are pulled out of the ground and commercialized,” the source told me.

Mell believes Ford’s Oakville announcement will end up being the canary in the cobalt mine—a harbinger of Canada’s auto-sector resurgence. 

“It’s easy to say, ‘The Big Three are doing this because it’s labour-contract time.’ But it’s a deliberate move on the part of our governments, and it’s hugely opportunistic.”