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Scarce yet essential for EVs, cobalt hogs the limelight

  • Significance of cobalt for li-ion batteries
  • Cobalt prices acting frenzy due to EVs demand
  • Reaction of miners and battery producers on price rise

 

Televisory’s earlier blog on ‘lithium-ion, the power to go’, examined how lithium-ion batteries which power electric vehicles (EVs) are driving consumption of lithium. In this article, Televisory will try to explain the consumption, availability and price trends for cobalt, a major component for cathodes in lithium-ion batteries, predominantly it does not receive a due credit.

Cobalt which has largely contributed towards technological developments, especially with respect to energy storing devices and is mainly mined as a by-product of other metals. Almost 97% of cobalt is mined as a by-product of copper or nickel. It is used for various purposes that range from powering small devices such as laptops and mobile phones to electric vehicles. Cobalt is also used in gas turbines, jet turbines, paints, tires and as a superalloy for production of magnets. The below graph displays the demand for cobalt by application, wherein, 51% of the consumption was driven by lithium-ion batteries. It is anticipated that by 2020, the demand for cobalt propelled by batteries will increase to 62%. The global cobalt market that stood at $4 billion in 2016 rose to $8 billion by the end of 2017 (Source: Bloomberg). This was due to a record price hike, which was triggered by a rising demand for electric vehicles.

 

Cobalt is fundamental to the functioning of the lithium-ion batteries. It is stable, possesses good balancing abilities and also has a perfect crystal structure to harbour lithium-ions. When lithium-ions move to and fro between electrodes, cobalt remain static and does not disappear into empty spaces. Moreover, most of the other metals used in cathodes are not immobile and get scattered. Lithium cobalt oxide cathodes offer an unparalleled energy density. A recent surge in the demand for electric vehicles owing to carbon emissions concerns has led to a peak demand of the metal. It is not just lithium that is facing a supply crunch, but the same is true for cobalt as well, this eventually led to a steep rise in prices of cobalt. In 2017, there was an estimated shortfall of 4,300 metric tonnes of cobalt, which was the highest since the market saw a deficit for the very first time in 2013. Further, apart from an increased demand, limited availability in the spot market and high purchases by investors added to the price rise. The below graph represents a price trend for cobalt since 2013, it has a key depiction on prices, which have more than tripled since 2016 and outperformed other metals.

Historically, cobalt for a long time has been associated with an unstructured supply. There is a dearth of primary mines for the supply of the metal, thus, the production is unlikely to meet the rising demand. The mined production has been decreasing since 2015 onwards (as shown in the below graph). Furthermore, the maximum amount is mined as a by-product of copper or nickel (Source: USGS) except for the production in Morocco and manual mining in Democratic Republic of Congo (Kinshasa). Additionally, the prices of the other two metals have been down and this makes several of their deposits unviable. What adds to the unstable supply side is the fact that the majority of the world’s sources of mines are concentrated in Congo, which is almost 60% of the mined production (refer to the below graph). The mining situation in Congo is in shambles with child labour, mining injuries and deaths and is affected by the local political conditions, all this is a cause of grave concern for numerous big companies which buy cobalt from the mines in the nation.

Although EVs and other energy storage devices are steering the demand for both lithium and cobalt, the major worry is with the availability of cobalt as it has a scarce geological supply. There are 53 million metric tonnes of global lithium resources which were reported in the Televisory’s earlier blog on the subject, out of this 16 million metric tonnes are economical reserves. However, cobalt identified resources world over are limited to 25 million metric tonnes, which is less than half of lithium. In addition, out of these scant resources, the figure for viable resources merely stands at 7.1 million metric tonnes. Hence, with a surge in the demand for lithium, miners, especially in Australia were quick to respond by expanding their production. However, a swift expansion is impossible for cobalt due to the above-specified constraints.

The resolve of major automakers like Volkswagen, Volvo, Telsa and Renault-Nissan-Mitsubishi to increase EVs scale of production is putting pressure on the leading mining companies such as Glencore and China Molybdenum to increase the mining. In 2017, China Molybdenum acquired a 70% stake in the Tenke Fungurume Mine in Congo as it holds the maximum concentrates in the world for the mineral. However, the acquisition by a Chinese player implies more circulation of the mineral in China. The nation is the world’s largest producer of refined cobalt (both mined as well as secondary production) and produces more than 80% of the metal. This provides China with a heightened control on the mineral and could be a cause of shortage for the refined cobalt in other countries and mainly for the non-Chinese EV manufacturers.

On a distinct note, Glencore at the beginning of 2018, refurbished Katanga Mining in Congo with improved techniques of cobalt extraction. It is anticipated that the mine would be in a position to meet 25% of the global cobalt demand (Source: CRU International Limited). Nevertheless, it is improbable that Glencore, which is the largest producer of cobalt and has a great bearing on prices will swamp the market with an excessive stock of metal to bring down the prices. Further, industry observers believe that an additional supply from major producers will be absorbed and stockpiled by big automotive firms, battery manufacturers and tech companies to maintain their internal demand-supply balance. For instance, China’s GEM has already signed a contract with Glencore that will provide uninterrupted access to one-third of its cobalt’s production for the next 3 years, while BMW and Volkswagen are seeking similar long-term supply contracts. As a matter of the fact, Apple is also looking for cobalt contracts for its phone batteries prior to stockpiling by automakers. This would mean less availability of the metal for other smaller sectors, thus, the over-all price issue will remain unresolved.

Abnormal price levels and a paucity of supply is thus compelling battery manufacturers to look for cobalt’s alternatives. Battery makers are now eyeing inexpensive components like nickel (prices are mentioned in the below graph) to restructure the composition of batteries. SK Innovation, a South Korean entity is researching to transform the ratio of nickel, manganese and cobalt in li-ion batteries, this is done in order to increase the dependence on nickel for the cathode. China’s Beijing Easpring Material Technology in partnership with Clean TeQ Holdings and Global Energy Metals is also exploring new cathode anatomy to disrupt the cathode market. However, this is not as simple as it sounds because no metal can easily replace the stability offered by cobalt in batteries. 

However, if there is a decrease in cobalt’s composition in batteries, an exceptional demand from electric vehicles will ensure that the market continues to grow significantly and will neutralise the effects of a declining percentage of cobalt’s use in batteries. Therefore, to summarise in the words of Marc Grynberg, Chief Executive of Umicore (leading material technology company), ‘we see the average cobalt content across all cobalt-containing lithium-ion cathodes (LCO, NCM and NCA) decreasing by 60 percent from 2017 levels by 2025; at the same time, the demand for cobalt from lithium-ion batteries will grow nearly three times.’ If the numbers estimated for EV market hold true, the demand for cobalt will continue in the upcoming years.