COMMODITY CAPERS: Try striking up a conversation about lithium-ion batteries without cobalt eventually featuring.
The reason is simple, cobalt contributes up to 60 per cent of the value of lithium-ion batteries, which in turn accounts for 42 per cent of demand for cobalt.
Cobalt’s other main use at 16% is in superalloys which compliments the battery demand as high-tech industry grows.
Therefore, there is little surprise that cobalt represents similar percentages of any discussion of lithium-ion batteries, electric vehicles (EVs) and all the other electronic paraphernalia that rules our modern world.
We have spoken in previous articles on how the lithium-ion battery is projected to become the world’s most significant source of power with their use in EVs being a key driver.
Bloomberg forecasts 35 per cent of vehicles sold by 2040 will be electric.
Those of us who remember the seventies know that isn’t far away and the fact that currently only one per cent of global car sales are EVs means they will be an omnipotent presence on our roads sooner rather than later.
One only has to recall how cool it was to have been the first kid in class to own a Casio digital watch to understand.
The number crunchers have determined cobalt demand is expected to rise at five per cent compound annual growth rate (CAGR) over the next four years.
Cobalt has been something of a poorer cousin in recent commodity terms, especially when compared to the battery markets eponymous metal, lithium.
Lithium kicked off all the excitement – and it took a long time to take off as crusty old exploration company executives struggled to come to the realisation that gold, iron ore, and uranium may have been losing the appeal, and importance, they once exerted over the rest.
Cobalt is expected to have a supply deficit as currently mining is only just meeting demand.
This has been reflected in a rise in the cobalt price which Deloitte, in its recent WA Index March 2018, said had,” increased by 1.4 per cent to US$81,000 per tonne as a beneficiary of bullish global demand for lithium.”
Deloitte claimed that electronics giant, Apple had been the subject of reports suggesting it was, “Entering into talks to secure long-term supplies of cobalt directly from cobalt miners amid fears of a looming shortage attributable to what has been coined the electric vehicle boom, has seen the metal’s price increase across February.”
The current price is heading in the right way, but it is still shy of the heady days of 2008 when it was sitting at US$52/lb (US$115,000/t), which was coincidently, also the last time global supplies of cobalt were in deficit.
The reason global cobalt supply is as tight as it is stems from approximately 98 per cent of the world’s supply being produced as a by-product of copper and nickel production with 15 mines representing half of the world’s supply.
Not only does this make supply tight, it also exposes it to any supply stream disruption, such as the shutdown of copper mining in the Katanga Province in the Democratic Republic of Congo (DRC) slicing off three per cent of cobalt supply.
Sixty per cent of global production comes from the DRC, which has a reputation as a politically unstable country and is thought by many to be somewhat unethical in its approach to the mining industry.
In the Fraser Institute Survey of Mining Companies, 2017, DRC was rated amongst the bottom ten jurisdiction in the world for investment according to the survey’s Policy Perception Index (PPI), a composite index that measures the overall policy attractiveness of the 91 jurisdictions in the survey.
That means the good corporate citizens of the world are looking elsewhere for their cobalt supplies to produce ethically-cleansed products for their equally ethically-minded customer base.
At the recent RIU Explorers conference, Patersons senior resources analyst Simon Tonkin declared cobalt as being the best performing commodity over the past 12 months.
“Cobalt is a critical metal in terms of lithium-ion batteries and it is very difficult to secure supply,” he said.
Tonkin suggested there was potential for the demand for cobalt to double by 2022 and that by 2030 some estimates are for 47 times the current cobalt demand.
“Australia has the second largest cobalt reserves in the world, he said.
“Hopefully we can look to exploit that position.”