Electric vehicle demand prospects drive cobalt to near $50,000 a tonne

Cobalt, a key element in lithium-ion batteries, has turned out to be the best performing commodity this year with its prices increasing by over 55 per cent since January 1.

Cobalt prices are ruling near $50,000 (₹36.23 lakh) a tonne on the London Metal Exchange (LME) currently.

Cobalt has gained on rapid growth in rechargeable lithium-ion batteries and energy storage on the back of strong global demand for electric vehicles (EV), mainly in Europe which has targeted to have 30 million zero carbon emission EVs by 2030.

Last year, the European Union (EU) topped China as the largest EV car seller with sales of 1.4 million vehicles. Though overall sales in the global market dropped 20 per cent year-on-year, the growth in the EU increased by 137 per cent.

China, which accounted for sales of 1.34 million EV vehicles, witnessed a 12 per cent rise.

According to the website EV-Volumes.com, sales of plug-in vehicles were 3.2 million last year with the EU accounting for 10.2 per cent of total sales.

Other nations, including India, are also trying to ramp up the production of electric vehicles as part of their objective to reduce carbon emissions.

A major reason for the current bullish trend in cobalt is global investment bank Morgan Stanley’s projection that EV sales will increase 50 per cent this year even as the growth of the vehicles using fossil fuels is expected to be 2-5 per cent only.

The metal’s role in battery

Cobalt is important in boosting the energy density and the life of the battery as it keeps the layered structure stable. This is because the lithium ions get stuffed into and extracted from the cathode during battery operation and that process cannot be reversed.

Cobalt also prevents the battery from blowing up.

Electric vehicles batteries, which can be recharged and used, mainly use a combination of nickel, manganese and cobalt cathodes. While nickel makes up 60 per cent, cobalt and manganese make up 20 per cent each.

According to an EU Joint Research Centre Science for Policy Report “Cobalt: demand-Supply balances in the transition to electric mobility”, between 5.5 kg and 11 kg of cobalt is required in EV batteries.

The Chinese factor

The dawning of the New Year has seen an uptrend in the Europe cobalt market particularly on the heels of increased demand from Chinese chemical producers.

China dominates the supply chain for electric vehicle batteries even as manufacturers are struggling to source cobalt products.

There are two factors why China dominates the batteries market. One, it has 90 per cent of the global capacity to refine cobalt chemicals.

The EU report said that by the end of this year, lithium-ion battery manufacturing capacity would top 400 GWh with China accounting for 70 per cent of the installed capacity. This would mean that China alone would require 80,000 tonnes of cobalt supply. The demand is compared with 1.4 lakh tonnes supplied last year. Various reports have cited stockpiling by Chinese manufacturers as a reason for the current spike in cobalt prices.

The second factor is the control of cobalt by China. Congo, which contributes two-thirds of the global output for the metal, is the largest producer but China wields enormous clout in the African nation. According to Roskill Consulting, which tracks cobalt developments, Chinese companies control over 40 per cent of the cobalt mining capacity in Congo.

This has been possible thanks to decades-long investment through the “minerals for infrastructure” deal between China and Congo. This gives China a clear edge as supply from other sources are nowhere nearer to that of Congo.

Against Congo’s production of nearly one lakh tonnes, Russia supplies a paltry 6,100 tonnes, Australia 5,100 tonnes, the Philippines 4,600 tonnes, Cuba 3,500 tonnes annually, according to various data.

Demand-supply equation

Cobalt from Congo is exported in the form of hydroxide that is converted into chemicals for lithium-ion batteries. The batteries find their use in mobile phones and the aerospace industry, apart from electric vehicles.The EU report has projected cobalt consumption to rise to about 2.2 lakh tonnes in four years and by 2030 it is expected to touch four lakh tonnes. In addition, demand for cobalt is expected from the consumer and portable electronics sector.

This would mean that the demand-supply gap can be bridged by recycling of batteries or exploration of other minerals. The recent development of cobalt-free batteries is also seen as a positive one from the viewpoint of the metal’s supply.

Benchmark Intelligence Supply, a metal tracking firm, says a delay in shifting to cathodes in batteries that have lower cobalt content is also telling on the supply-demand gap.

Where India stands

Though India is reported to have ore resources to the tune of 4.49 crore tonnes, the potential is yet to be tapped. According to the Bureau of Mines, there is no cobalt production here. However, less than 1,500 tonnes of cobalt is refined annually against a capacity of 2,500 tonnes.

Currently, Indian users of cobalt are looking to own mines abroad as part of their efforts to produce lithium-ion batteries indigenously.