Cobalt: The ultimate in Blue Sky Mining
COMMODITY CAPERS: When Georg Brandt discovered cobalt back in 1735, he probably had very little idea of the importance of his find to the global population three centuries later.
Although Brandt was credited with the discovery of cobalt, it seems the Egyptians knew about it well before batteries were on the agenda, using it to colour pottery and glass from a least 2,600 BC.
The Chinese were also early movers, using cobalt in pottery during the Tang (600-900AD) and Ming (1350-1650) dynasties.
Cobalt is a by-product of nickel and copper mining activities with around 64 per cent of production copper related, 33 per cent nickel related and only 3 per cent produced by primary cobalt operations.
The main sources are from the southern part of the Democratic Republic of Congo (DRC), which holds close to half of the world’s cobalt reserves.
Australia, Cuba, Zambia, New Caledonia, Canada, Russia, Madagascar and Brazil hold much of the balance of global cobalt reserves.
There’s been plenty of noise in recent times from lithium explorers regarding the surge in demand from the rechargeable battery industry, and subsequently, mobile phone, computer and electronics industry in general.
The rechargeable battery market has, in turn, also been responsible for sustained growth in demand for cobalt, especially from the techno epicentre of the world, China.
In its 2015-2016 Cobalt Review, Darton Commodities said the rechargeable battery industry was responsible for demand for cobalt growing an estimated 11.7 per cent in 2015, with consumption within the sector hitting around 45,600 million tonnes.
To provide an idea of the growth spurt cobalt has enjoyed in recent time, Darton explained that battery related usage in 2010, represented just 28 per cent of total cobalt demand.
Fast forward to 2016 and that figure was anticipated to double, with over 50 per cent global production being used up by battery production.
“This share will continue to increase exponentially as demand growth from this industry continues to outpace growth in all other consuming sectors,” Darton Commodities said.
Darton cited Antaike analysts, saying over 77 per cent of all cobalt being consumed in China during 2015 was used for battery applications, a figure which is set to rise further in the years to come.
In its Cobalt Market Outlook 2016 report, Mining and Metals analysts CRU senior consultant Dr Edward Spencer said he expected the refined cobalt market to fall into a 3,000 tonne deficit this year following seven years of overcapacity and oversupply.
“CRU anticipates prices to increase onward into 2017 as global demand for refined cobalt exceeds the 100,000 tonnes mark and mine and refined supply tightens,” Spencer said.
Darton said the 2017 resumption of operations which were previously closed and other factors could see demand growth recover to 5.2 per cent, a level it noted to still be below the multi-year average.
“The potential for further production increases during 2018 are limited as most operations, including the so-called ‘new’ projects, will have approached capacity yet the charted scenario assumes an additional 3,000 million tonnes of output being achieved on the back of firmer market prices,” Darton said.
“A theoretical 8,000 million tonnes of additional refined cobalt output entering the market over the 2017-2018 period (with demand showing modest recoveries during the same period) would not appear to be sufficient to bring the supply/demand balance back into surplus territory.
“In fact, current projections suggest an even bigger shortfall in supply towards the end of the decade.”
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It should be no surprise to anybody that mobile phones have been one of the great contributors the battery market.
Those same people would be fairly surprised to learn that data published by American Research and Advisory Firm Gartner showed worldwide smart-phone sales grew a modest 16 per cent over the first nine months of 2015 and sales of feature phones an even more modest six per cent.
As much as the phone companies would like you to think everybody trades up once the new models hit the stores, it appears people are becoming more circumspect with the increase in smart-phone sales cited above being driven by the demand for affordable 3G and 4G smart-phones in emerging markets, as well as the introduction of new models like the iPhone 6 end 2014 and the 6S late 2015.
The usually reliant Chinese technophile held things back – with the world’s biggest market for smart-phone sales and representing over 30 per cent of the total global market, now at a point where growth is generated by replacement purchases rather than first-time buyers.
“Late January (2016) Apple announced that during the last quarter of 2015 it saw its slowest ever increase in iPhone shipments since the product was launched in 2007, primarily due to weaker sales into the Chinese market,” Darton said.
“At the same time Samsung, the world’s largest smart-phone maker by volume also reported weaker growth in the fourth quarter, warning that a recovery in sales would be slow.”
If the last twenty years of mobile phone use around the world has told us anything it’s that consumers will embrace technology.
Who knows what the next device may look like, or how it will be used, but until that comes along the next industry shaping up as the next big thing is the use of Li-ion batteries for the transport electrification market.
Plug in Hybrid Electric Vehicles (PHEV) and Electric Vehicles (EV) are forecast to underpin the biggest growth for cobalt demand in coming years.
Many factors have contributed to global acceptance of electric vehicles, resulting in a notable rise in the introduction of new models and global sales in 2015, particularly in – you guessed it – China.
Darton said sales of New Energy Vehicles in China reached 331,092 units in 2015 – according to CAAM (China association of Automobile Manufactures) – up 343 per cent from the previous year.
Another contributing factor was China’s commitment to reduce pollution by scaling back emissions while owning a regular internal combustion engine vehicle was discouraged in certain cities.
“As China’s emission regulations will become tighter in the coming years, an even stronger push for electrification is expected during the remainder of the decade,” Darton said.
The Chinese have not been alone displaying electronic motoring enthusiasm with other countries purchasing an estimated 447,617 of EVs and PHEVs throughout 2015, up 59 per cent from 2014.
“Improved range capability, government subsidies and fiscal advantages, a growing model range, an expanding charging infrastructure and a gradual but continued decline in vehicle cost are all helping to improve market acceptance with mainstream consumers in particularly the Japanese, European and US markets,” Darton said.
“The recent Volkswagen emission scandal is believed to have helped catalyse a faster and broader transition from diesel to electric cars as the US and Europe target reductions in greenhouse gas emissions by 20 to 30 per cent by 2020.
“Consequently, industry forecasts suggest that vehicle sales and associated battery demand will continue to gather momentum, with sales surging during the balance of this decade.”
In January 2016, Volkswagen announced a commitment to electric cars, saying at least 20 electric or plug-in hybrid vehicles would be added to its model range by 2020, including Seat, Audi and Skoda.
The People’s Car was quickly joined by European competitors including Mercedes Benz, which introduced four entirely new electric car models to the market for 2017 along with plans to introduce plug-in hybrid versions for most standard models already in production.
BMW announced an engineering rethink with potential for all future models from the 3-series upwards to become all-wheel drive range extender electric cars, a technology already present in the company’s i3 and i8 models.
Renault-Nissan committed around US$5.2 billion for EV and battery development programs while Mitsubishi is scheduled to launch another three new SUV models as PHEV and EV before 2020.
Over the water GM is introducing the Neil Young-inspired all electric Chevrolet Bolt in 2017 and Ford is scheduled to bring 13 new EV models to market by 2020.
A discussion on EVs would hardly be complete without referencing Tesla, which having released its full electric Model, launched its new Model 3 in March 2016, with production and introduction of the $35,000 model scheduled for 2017.
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