Cobalt

Cobalt is an important raw material used in the production of lithium-ion (Li-ion) battery materials, superalloys, high-temperature alloys, cutting tools, magnetic materials, petrochemical catalysts, pharmaceuticals, steels and glaze materials.

Key Features:

Cobalt is an important raw material used in the production of lithium-ion (Li-ion) battery materials, superalloys, high-temperature alloys, cutting tools, magnetic materials, petrochemical catalysts, pharmaceuticals, steels and glaze materials. Cobalt demand is split between new and old economy drivers. New economy drivers include li-ion batteries and superalloys. Old economy drivers are typically industrial uses that include steels, tools, industrial chemicals and magnetic materials. The most significant driver of Cobalt demand remains Li-ion batteries. Consumer electronics, Electric Vehicles (EVs) and Energy Storage Systems (ESS) are the dominant uses for li-ion batteries.

Key Applications:

  • Li-ion batteries - EV
  • Li-ion batteries - ESS
  • Chemicals
  • Super alloys
  • High-speed steel
  • Hard-facing tools
  • Magnets
  • Others

Leading Cobalt Producers (2020):

  • Glencore
  • China Moly
  • ERG
  • Huayou CNMC
  • Shalina Zhejiang
  • Jinchuan Group
  • Wanbao
  • Vale
  • Norilsk Nickel

Key End Markets:

Cobalt use in chemical applications is dominated by the rechargeable batteries segment. Key sectors include Li-ion batteries for EVs, Li-ion batteries for other applications (laptops, PCs, smartphones etc.), polyester and tires. Approximately 50% of the world's Cobalt supply is used in the rechargeable battery industry, where Cobalt is an important component in li-ion batteries, with additional uses in nickel metal hydride batteries and nickel cadmium batteries. Cobalt use for the metallurgical industry is primarily centered on high-temperature alloys. Key sectors include superalloys (aerospace rotating parts, defense, power generation, thermal sprays, prosthetics etc.), high-speed steel, carbide, diamond tools and magnets.

Supply Characteristics:

Annual primary production in 2019 was approximately 140,000 metric tonnes. Annual demand for Cobalt is expected to surge to 210,000 metric tonnes by 2025, a 63% increase since 2017. The main reserves of Cobalt are concentrated in the DRC, Australia, Cuba, the Philippines, Canada and Russia. Currently, more than 70% of demand comes from China and is met by the DRC.  

cobalt graph2.jpg
Source:  Cobalt Primary Supply by Country/Region. ( US Geological Survey)

The DRC produces 71% of Cobalt today. The top five Cobalt producers control ~53% of global supply, typically sourced from DRC-based operations. China then processes 80% of global intermediates, producing Cobalt metal or Cobalt salts. Secondary supply of Cobalt (scrap/recycled Cobalt) remains small-scale, but is expected to increase post 2025 as increasing quantities of EV batteries become available for recycling. The second-largest Cobalt reserves are located in Australia. Australia’s Cobalt is expected to be in high demand going forward, as consumers increasingly seek secure and ethical supply sources. Australia’s Cobalt is primarily found in nickel laterite resources, and has also been extracted from copper deposits. With Australia holding an estimated one-sixth of the world’s known Cobalt reserves, there are significant opportunities for Cobalt extraction from existing mines, the development of known deposits and the discovery of new deposits.


Price Dynamics:

Currently, Cobalt is traded as a commodity between companies. There is no liquid market available from a trading terminal, a situation similar to the lithium market. Consultants provide transparency by accumulating company-to-company transactions (provided they meet market specifications) and report these outcomes periodically, on a subscription basis. For example, at the time of writing, Fast Markets (formerly Metal Bulletin) was quoting Cobalt metal (99.8% grade) twice weekly. Pricing data for Cobalt metal (various grades) and Cobalt chemicals (typically hydroxides and sulphates) are not freely available. The London Metals Exchange first listed Cobalt metal in 2010 and has provided pricing data. The Cobalt price has been monitored approximately since June 2005. According to Mining.com, in the last 15 years the price peaked twice: April 2008 and April 2018 (see chart below), at US$52,25/lb and US$42,29/lb. More recently, Cobalt prices rallied from US$15.00/lb in January 2021 to US$20.25/lb on May 11, 2021. The LME three-month future cost US$44,000/tonne on May 14, 2021.

cobalt graph1 (1).jpg

Source: Mining.com

Cobalt prices experienced a rally from 2016 to early 2018, as rising demand, given the strong positive outlook for EVs, combined with insufficient supply to create an ideal backdrop. After March 2018, prices collapsed precipitously, with the metal losing around 70% of its value, although it has recently staged a recovery. The driving factor is that growth rates for EVs did not live up to the initial hype. Instead, the 2016 EV-fuelled price rally triggered a “cobalt rush”, as miners sought to capitalise on higher prices. This supply boost—especially from the Democratic Republic of the Congo (DRC), which is home to more than 60% of the world’s mined cobalt output—led to the sharp sell-off.

Forecast:

IHS Markit expects global cumulative sales of battery electric vehicles (BEV) and other EVs to have reached nearly 2.5 million in 2020, and then rise by about 70% in 2021. For 2021, China and Europe should account for the largest market shares by far, with China at about 44% and Europe at nearly 28%. Lagging behind are North America with 16%, and a combined Japan/South Korea share of 11%. In 2025, global sales should top 12.2 million, indicating annual growth of nearly 52% (compounded), according to IHS Markit’s December 2020 forecast.
Many countries have set fleet CO2 targets as part of wider efforts to decarbonise and meet commitments under the 2015 Paris Climate Agreement. Europe has come forward with “the most comprehensive and severe legislation for transport CO2 emissions.” For instance, automakers must slash fleet CO2 emissions 15% by 2025 and 37.5% by 2030, compared to a nominal 95g/km base set for 2021. All types of hybrid setups are forecast to grow through 2030, though the types offered within individual markets will be linked to government incentives. According to Sopheon Report, mild hybrids (MHEVs) should see rapid growth in the near term, jumping from 3% of the global market in 2020 to 15% in 2025 and 20% by 2030.
The established trading history of Cobalt’s superalloy and metallurgical applications provide some indication for future demand behaviour. According toCRUX Investorfive-year demand growth of 5% and 2% respectively is expected for these segments. In particular, demand for superalloys is expected to be hit by the impact of Covid on air travel over 2020-23.
CRUX Investor’s 2021-30 Cobalt market forecast stresses that battery demand remains buoyant and should reflect secular EV and ESS growth, along with more GDP-like growth from the consumer electronics segment. There are several core drivers for battery demand: improving EV driving range and ownership economics, in turn stimulating consumer adoption; increased penetration of ESS devices, both household and utility scale; and improved stability and safety performance of li-ion batteries. EV batteries will dominate the 2021 battery market, accounting for an aggregate 54.7% of all battery materials and a 2016-21 CAGR of 23.7%. ESS demand should account for 24.4% of all battery materials and an even more impressive 2016-21 CAGR of 36.7%. Together this should drive strong demand for battery materials at a 2016-21 CAGR of 30.3%. According to CRUX Investor, cobalt demand growth should significantly outpace supply over 2021-30 and lack of cobalt on the global market could achieve around 156,000 tonnes by 2030.

Resources

  1. The Cobalt Market 2021-2030F
  2. Cobalt from Congo: how to source it better. (2019). Transport and Environment.
  3. Cobalt Development Institute (CDI)
  4. ERG AFRICA
  5. New OECD report challenges assumptions about risks in cobalt and copper sourcing. (2019). Organisation for Economic Cooperation and Development (OECD).
  6. Australia cobalt sector set for long-term growth – report.(2020). Fitch Solutions.
  7. Russia ready to increase domestic cobalt production – even under the Pacific Ocean. (2020). Resource World.
  8. Sustainability and Second Life: The case for cobalt and lithium recycling. (2019). International Institute for Sustainable Development. 
  9. China must accelerate EV battery recycling. (2020). Airquality News.
  10. Fortum claims a breakthrough in recycling lithium-ion batteries. (2020). Innovation Origins. 
  11. EMR partners with automakers to recycle EV batteries. (2020). Recycling Today.
  12. WMG part of new eLV car battery project. (2020). University of Warwick.
  13. Li-ion battery recycling, a catalyzer to proper waste regulation. (2020). Yole Développement.
  14. Responsible Minerals Initiative (RMI)
  15. Global Electric Vehicle Battery Industry. (2020). Reportlinker.
  16. Passenger Plug-In Electric Car Sales In Europe In Q1-Q3 2020 By Country. (2020). INTERNATIONAL JOURNAL ELECTRIC AND HYBRID VEHICLES.
  17. Albers, G., Day, E., Fullerton-Smith, S., Hamilton, J., Ringrow, J., Walton, B., Woodward, J., Electric Vehicle: Setting a Course for 2030. (2020, July 28). Deloitte Insights.
  18. China Dominates the Lithium-ion Battery Supply Chain, but Europe is on the Rise. (2020). Bloomberg NEF
  19. Cobalt demand for 5G technology to challenge electric vehicles. (2020). Reuters
  20. Energy storage startup SPARKZ licenses ORNL cobalt-free battery tech. (2020). OAK RIDGE.
  21. European project to develop cobalt-free EV batteries awarded €11.8M. (2020). Green Car Congress.
  22. The London Metal Exchange.
  23. Cobalt's price crash bottoming out, stocks to hinder quick rally. (2020). Reuters.
  24. Fastmarkets
  25. Fastmarkets, CME to launch cash-settled cobalt futures contract. (2020). MINING COM.
  26. Speech by Vice-President Šefčovič at the launch of the European Raw Materials Alliance.
  27. Electric Vehicle Outlook 2019. (2019). Bloomberg NEF   
  28. Roskill:Cobalt demand to grow steadily over the next decade as a technology enabler. (2020). Roskill Information Services Ltd.
  29. IHS Markit
  30. Sopheon

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