Cobalt Will See A Major Boost Due To Soaring EV Demand

According to a report by Fitch Solutions, cobalt will get a substantial lift thanks to the global shift towards a green economy. Short and mid-term, the metal will be boosted by China’s acceleration of electric vehicle (EV) production, while Europe’s EV adoption will maintain the metal at a high in the long run.

How does it pan out for cobalt amid growing prices and emerging projects?

Cobalt Outlook

Cobalt is an essential material for rechargeable batteries given its stability, toughness, anti-corrosion features, and high-temperature resistance.

Global supply will continue to be very much geographically focused in the coming years, with the Democratic Republic of the Congo (DRC) hogging mining and China controlling refining. This is likely to pose supply problems for battery manufacturers.

Still, things look bright for this metal.

Cobalt is used to produce nickel-based alloys —13% of total consumption– very commonly utilized in the aerospace industry. Tool making represents 8% of total consumption, while pigments and soaps use the metal in a smaller measure. 

The use of cobalt as a cathode in rechargeable batteries also effectively improves their energy density, power, and performance, compared to those without it.

Driving Demand

At present, the end-use of cobalt mainly relates to portable electronics, which accounts for 36.3% of global consumption. On the other hand, 23% of its use belongs to electric vehicle production and Fitch expects the latter to drive demand for cobalt in the next few decades.

“Stratiform sediment-hosted copper-cobalt deposits (mostly in the DRC and Zambia) represent the world's largest source of cobalt, followed by nickel-cobalt laterite deposits (mainly found in Australia, Cuba, New Caledonia, Madagascar, Papua New Guinea, and the Philippines) and lastly magmatic nickel-copper cobalt PGM deposits (mainly Canada, Russia, and South Africa).”

In the meantime, deep-sea mining is still way underdeveloped and poses economic hurdles that are hard to straddle. The lack of technological resources prevents scouring for this material at sea bottoms potentially containing up to 1 billion tons.

Higher Prices To Increase Production

According to the Fitch report, cobalt sulfate prices are likely to increase steadily over the next three years as demand from battery manufacturers will continue to exceed supply. The number of cobalt sulfate projects that have already started will launch as of 2023-2024, which will increase production and lure investors for new projects.

Further, according to Fitch, the acceleration of new electric vehicles in China will greatly boost global demand for cobalt sulfate in the short and medium term, while the increase in penetration of electric vehicles in Europe in the next decade will support demand long term. 

Although Fitch expects production to increase thanks to ongoing projects to be launched in three to five years, prices will follow an upward trajectory as demand will also accelerate in parallel.

According to Mining.com, “there is currently a solid global project pipeline, due to the rise in cobalt prices and the expected demand boom amid the proliferation of battery manufacturing projects, which will aim to diversify to some extent production channels.”

What’s The Outlook?

According to Fitch Solutions, North America and Europe will not see much of a significant jump in cobalt production as both resources and mining projects are somewhat scarce. 

However, it is the electric vehicle battery craze what will increasingly pave the way and delineate the trends of cobalt mining, since “most of global refined cobalt is being converted to chemical forms that are used in rechargeable batteries as opposed to cobalt metal that is mainly used in other industries.”

Fitch remains optimistic about the new cobalt initiatives that are already lined up for over the next ten-plus years. However, not all is glazed in honey.

Of all the exciting projects at present, a good deal hasn’t gone past the pre-feasibility phase and could not even take place, given the lack of financial backing and some fierce environmental opposition. 

Disclosure: No positions