Known colloquially as the “blue” metal, cobalt is being tipped to play a major role in the global push to reduce C02 emissions thanks to its role as an important component in electric vehicles (EVs).
Cobalt ranks 33rd in the abundance of all metals in the earth’s crust. It is widely scattered, yet it appears in economic quantities in fewer than 20 countries globally.
Now, with new energy becoming a growing force, many countries around the world have included cobalt on their list of critical minerals, largely due to its use in batteries.
Cobalt is primarily produced as a by-product of copper and nickel ore processing and production. As a result, cobalt supply is closely tied to the copper and nickel markets – two metals also considered as important components in EV market development.
The Sony Corporation first commercialized cobalt-based lithium-ion batteries over 30 years ago. Cobalt-based batteries were an improvement on previous battery types because they have high specific energy v weight, they can hold charge and power over time, and are generally maintenance-free.
Nowadays nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminium (NCA) battery compositions are dominant in the EV industry, accounting for over 90% of the global EV battery market in 2020.
EVs driving demand
Because of the strong acceleration in EV development and demand, most analysts are forecasting a matching increase in cobalt demand and prices, with market analysts CRU predicting that 120,000 tonnes, or nearly 45%, of cobalt demand in 2025 will be needed for the EV market.
Most forecasters are tipping a particular surge in demand over the next 10 years, with the market volume of cobalt forecast to amount to a total of nearly 200,000 tonnes worldwide in 2025, an increase of more than 100% from the 2017 market volume of 99,300 tonnes.
Meanwhile, analysts at Roskill forecast cobalt demand will rise to 270,000 tonnes by 2030 from 141,000 last year.
This strong demand growth has also led forecasters to suggest that supplies may struggle to keep up.
Houston-headquartered Stratas Advisors recently tipped that by 2026, there will be a supply crunch, which will result in elevated prices for cobalt – if EV manufacturers stick to high-content cobalt.
Supply chain issues
The majority of worldwide production in 2020 came from the Democratic Republic of the Congo (DRC), and followed by Russia, Australia, Philippines, Cuba, and Canada.
However, the DRC’s position as the dominant supplier and holder of reserves is considered a major risk due to political uncertainty, a culture of corruption, and unscrupulous mining practices – such as the use of child labour.
It is also claimed that around 20% of the DRC’s production comes from ill-equipped, small-scale “artisanal” miners.
However, Stratas Advisors believes the cavalry is coming with additional input of approximately 40,000 tonnes per year to be supplied by new projects in Cuba, Australia, and Southeast Asia by 2022, with another 45,000 tonnes per year by 2025.
Meanwhile, S&P Global is predicting the cobalt market may actually move into deficit by 2024, forecasting a shortfall of as much as 11,000M tonnes if Glencore’s Mutanda mine in the DRC isn’t re-started.
Broking firm Canaccord is also tipping market shortfalls as early as 2024 when the market enters a deficit.
The global demand for cobalt is expected to surge to over 200,000 mt per year by 2025, according to Eurasian Resources Group (ERG), a leading producer for battery-use cobalt that is headquartered in Luxembourg.
New avenues of exploration
First Cobalt Corporation (TSXV: FCC | OTCQX: FTSSF), which is building a new environmentally friendly battery raw materials supply chain in North America, is understandably bullish on Cobalt’s immediate future.
The company says cobalt-bearing lithium-ion battery chemistries will dominate in the foreseeable future, while EV battery installations are forecast to reach 1,853GWh by 2030, compared to 145GWh in 2020
Cobalt demand from the battery segment will make up more than 90% of total growth, with a CAGR of 19% over the 2020-2030 period.
First Cobalt Corp.recently signed a flexible, long-term, offtake agreement with Stratton Metal Resources Limited for the sale of future cobalt sulphate production from the First Cobalt Refinery located in Ontario, Canada.
First Cobalt will have the option to sell up to 100% of its annual cobalt sulphate production to Stratton Metals once its refinery is in production. Stratton Metals is a London-based metals trader that specializes in offtake and marketing of base metals on a world-wide basis, with a particular focus on nickel and cobalt.
In December 2020, the government of Canada and the government of Ontario announced a joint C$10M investment in the First Cobalt Refinery to help accelerate commissioning and expansion.
Another company bullish on cobalt growth is Cobalt Blue (ASX: COB) which is developing the Broken Hill Cobalt project in New South Wales, Australia. The company notes that back in the mid-1990s, batteries represented only 1% of cobalt demand (~1,000 tpa). Now, cobalt demand is around 70,000tpa and as the new economy grows, so will the demand for cobalt.
However, it is that dramatic demand growth and rising prices, which is also a threat to Cobalt’s future.
Many battery developers are already investigating how to replace elements like cobalt in a push to keep future battery prices down.
Lithium Australia (ASX: LIT) recently claimed the proportion of cobalt-free batteries in the LIB market space continues to grow following the release by BYD and Tesla of all-electric vehicles powered by lithium iron phosphate (LFP) type LIBs.
The company’s managing director, Adrian Griffin, says LFP-type LIBs contain no cobalt or nickel and use 20% less lithium per unit of stored energy when compared with their more common cobalt and nickel-based competitors.
He also suggests that LFP batteries are much safer, and that is why many automotive manufacturers now offer entry-level EVs powered by LFP batteries.
“The shortage of nickel and cobalt-free cathode materials outside China is of great concern; however, the possibility of producing such material here in Australia has garnered enthusiastic support – from local miners right through to international battery producers,” Mr Griffin says.