Manufacturers of batteries for electric vehicles (EV) will likely face procurement challenges as the global cobalt supply chain will remain highly geographically concentrated in the coming years.
Congo will dominate cobalt mine production, while China will lead in refining of the metal, according to Fitch Solutions Country Risk and Industry Research (FSCRIR).
But “a solid global project pipeline, due to rise in cobalt prices, and expected demand boom amidst proliferation of battery manufacturing projects” will aim to diversify the production channels to some extent, the agency said.
Surge in EV sales
The projections are significant on the heels of EV sales surging 160 per cent in the first half this year compared with the same period a year ago, with the top three auto markets — China, the US and Europe — reporting good growth. Total EV sales this year are expected to top five million.
EV sales are on the rise in India, too, with April-August sales topping 87,000 this year and a 11 per cent rise in August sales. Global EV sales have helped cobalt prices gain over 65 per cent since the start of the year. Currently, the metal is quoted at $53,380 a tonne.
EU, N. America lack resources
Fitch Solutions said Australia is one of the countries that holds significant growth potential to produce cobalt with multiple integrated projects in the pipeline. “We see limited production growth in Europe and North America in the coming years due to the lack of resources and projects” FSCRIR said in a report on the global cobalt supply chain.
Recycling lithium-ion batteries for the EV era
Battery revolutions will increasingly decide cobalt production trends and most of global refined cobalt will be converted to chemical forms that will be used in rechargeable batteries as opposed to cobalt metal that is mainly used in other industries, the agency said.
Fitch Solutions said though it was optimistic on new cobalt projects that would come online next decade, there were risks in completion of the projects. “Many are still in the pre-feasibility stage, especially in Australia, and may not reach fruition in the end due to lack of finance or environmental opposition, for instance,” FSCRIR said.
‘We now need ways to store energy, not fuel’
Global cobalt projects are also likely to face environmental scrutiny, while the possibility of batteries without cobalt might dampen the metal’s demand outlook and prices altogether, it said.
Green economy boost
The global cobalt sector has received a shot in the arm from the global shift to the green economy as the ferromagnetic blue metal is a key component of rechargeable batteries and valued for its stability, hardness, anti-corrosion and high-temperature resistance characteristics.
Cobalt is also used in the manufacturing of nickel‐based alloys (13 per cent of total consumption) which are used extensively in the aerospace industry, tool manufacturing (8 per cent of total consumption) and, finally, smaller amounts in pigments, soaps and as catalysts. The metal is also used in electronic products such as smartphones and laptops that make up 36.3 per cent of the global offake, while automotive applications account for 23 per cent of the consumption.
Consumption by the automotive sector will likely drive the demand for cobalt in the coming decades, Fitch Solutions said.
Issues with Congo
Dwelling on the geographical concentration of mine production, FSCRIR said Congo accounted for 67 per cent of global supply last year and it will continue over the next few decades. The supply will, however, be determined by political stability in Congo, labour issues there, corruption and transparency.
On the other hand, cobalt refining is concentrated in China, which accounts for 66 per cent of global refined cobalt, and the situation will continue over the years to come. New cobalt refining projects are coming up globally that can reduce China’s market share, though only to a limited extent.
One problem for China and Finland, the second highest refined cobalt producer with a 10 per cent share, is that both depend on Congo for their feedstock.
Lack of transparency
Cobalt recycling, mainly from recycling batteries, is also an important and fast-growing source of cobalt feedstock to the supply chain. Fitch Solutions said lack of transparency in the cobalt market is the primary impediment to a smooth supply chain. Limited refining capacity outside China will continue to pose challenges for sometime to come even if actual global supply will be ample.
Additionally, the cobalt supply chain is increasingly mired with ongoing concerns over environmental, social and governance risks. Of late, battery makers have made efforts to reduce cobalt content in batteries due to these concerns and are, instead, using nickel-rich cathode chemistries.
One of the largest EV producers, US-based Tesla Inc has said it will move to a cobalt-free battery without specifying any time frame. But such substitution could lead to loss of performance of the product or increase in cost and this will boost demand for cobalt, FSCRIR said.