Cobalt prices are skyrocketing and the demand for this once unpopular metal is rapidly increasing. The uses for cobalt used to be limited to producing alloys for gas turbines and jet engines. However, recent tech advances in battery technology has now made this metal one of the most highly sought after element in the industry and it is all for a good reason.
Lithium Batteries are Dependent on Cobalt
Cobalt was discovered by Swedish chemist George Brandt in 1739. It’s a by-product of nickel and copper mining. Later on, cobalt was used as a cathode material of Lithium-ion batteries that we use today. The ever-increasing demand for lithium batteries is driving prices up. Just from the previous year, the price for cobalt has more than doubled as said by the United States Geological Survey.
Manufacturers are looking for alternatives but the need for the metal in batteries can’t be fully eliminated. Engineers are capable of finding alternatives for elements or change the design of certain technologies but cobalt in lithium ion batteries are difficult to replace as the possible substitutes for the metal can actually cause a decrease in performance of the battery. According to CEO of Umicore Marc Grynberg, there is no better element to make the battery stable than cobalt. The idea of phasing out cobalt for battery technology won’t be possible in the next three decades or so.
Supply and Demand
To better understand the cobalt issue, it is necessary to know the demand volume. Batteries account for 42% of cobalt use. Cobalt is also used in electroplating and stainless steel; in making magnets; in making alloys for high-speed and high-temperature cutting tools and dies; alloys for gas turbines and jet engines.
The following are the some of the devices and vehicles which are expected to increase in sales in the coming years, and the amount of cobalt in their batteries for each item:
At present, Apple is the largest end-user of cobalt. In 2017, Apple sold 216.76 million iPhones. Conservatively, that is equivalent to more than a 1,030 metric tons of cobalt for the iPhones sold in 2017 alone. Tesla sold more than 103,000 cars in 2017, roughly equivalent to 2,300 tons of cobalt. In 2016, there were 156.8 million laptops and 174.9 million tablets were sold, accounting for a total of close to 21,000 metric tons of cobalt.
Cobalt production in 2017 totaled 110 metric tons. The top 6 producers were:
|Country||2016 Production (metric tons)||2017 Production (metric tons)||Reserves (metric tons)|
|Democratic Republic of the Congo||64,000||64,000||3,500,000|
To put the growing demand into perspective, especially for electric vehicles, current total investments in electric vehicles total $90 billion, of which the US accounts for $19 billion, China investments are estimated to be $21 billion, and $52 billion in Germany. This will ramp up considerably in the coming years, with Volkswagen already committing to $40 billion in investments by 2030 for the EV version of more than 300 models. Volkswagen is the parent company of Volkswagen cars, Audi, Porsche, Skoda, SEAT, Bentley, Bugatti, Lamborghini, Ducati, VW commercial, MAN trucks and Scania.
The Race to Buy and Secure Supply
With the current cobalt supply just keeping up with demand, future growth for batteries would be hindered if the supply slips even a little. This would explain the recent rumor that Apple was in direct talks with mining companies for their supply of cobalt in the next five years. Although Apple did not comment on the rumors, Glencore PLC acknowledged that Apple was one of the companies that have approached them to directly supply them with cobalt. Glencore PLC is the largest cobalt producer in the world with 29% of production. The Swiss-based company is included in the Fortune Global 500, listed 14th in terms of revenue. The company is projected to have production growth of 133% over the next three years. Their 2018 forecast is production of 39,000 metric tons of cobalt, an increase of 42% from last year.
With this move, Apple would be able to save several billion dollars if they can source cobalt directly from mining companies. This would also result in transparent sourcing of materials due to concerns about illegal mining in Africa as well as child labor issues. Last year, Apple released a list of cobalt mining companies where their batteries were sourced, with a message that it would not buy from small-scale mines in the DRC unless “appropriate protections” were put in place.
Apple is not the only manufacturer seeking to secure their supply of cobalt. Others include Volkswagen AG, BMW AG, Samsung SDI Co. and SK Innovation. Samsung is the number one android manufacturer in the world, and their continued leadership in terms of sales is dependent on the supply of batteries. SK Innovation is South Korea’s top oil refining company and they have secured an agreement with Australian Mines Ltc. for least $3.9 billion worth of cobalt and nickel. SK Innovation will in effect buy all of Australian Mines production in the new Sconi mine in Queensland, Australia. This will be used in their Hungarian EV battery manufacturing plant to fill up the expected output for the next 10 to 13 years.
Although BMW does not have any electric vehicles on the road at the moment, they are on the road to securing supplies for both cobalt and lithium. They’re looking towards a 10-year supply of both metals for batteries as part of their own EV strategy.
Impending Cobalt Crisis?
The Macquarie Research estimated that there will be a deficit of 885 tons this year. This is expected to increase to 3,205 tons by 2019, and 5,340 tons by 2020. In the meantime, the price of cobalt on the market has increased more than 330%. The increasing deficit is expected to further impact the market price of cobalt.
This may have already impacted some companies. Volkswagen has so far been unable to secure their estimated amount of cobalt. This failure has actually brought forth a concern of whether or not there is an impending cobalt crisis. Caspar Rawles is an analyst at Benchmark Mineral Intelligence and has stated that there is actually enough cobalt to meet the demands in the foreseeable future. The big problem is if we can get hold of the metal fast enough. This is where the problem arises as cobalt is still mined as a by-product of nickel and copper. In fact, 97% of the world’s cobalt supply is still the result of nickel and copper mining and most of them come from Africa. Unfortunately, the prices of these metals are still on the downturn, and are currently at six-year lows, resulting in uneconomic production. There is a lot of reasons to open up new mines for cobalt. However, it is not a feasible solution considering the costs and development time.
The bold impact of cobalt in the long run is that it will still be mined for a long time to come, with new mines coming into line, and the large reserves in the Congo. However, almost as bold is the idea of companies buying supply chains for their future uses. Companies like Tesla, Apple, BMW, Samsung and VW need to make sure that they have a steady supply before they can promise the production of their products in the next five, ten or twenty years.