This article is part of our series on investing in battery metals. You may also like our comprehensive guide to metals and mining.
As cobalt, a crucial component in lithium-ion batteries for EVs, gains prominence, the global production landscape is witnessing changes. The global trajectory toward a sustainable future requires vast reserves of minerals. While energy storage has heavily banked on graphite, lithium, and notably cobalt, the surging demand and its implications on various industries are more intricate than a cursory glance would suggest.
Cobalt: A Keystone in Modern Technology
Cobalt, a silvery-blue brittle metal, has roots tracing back to ancient Egyptian times. Today, it finds its way into various applications such as industrial processes, biotechnology, animal feed, pharmaceuticals, laptops, smartphones, and especially in energy storage for technologies like electric vehicles (EVs). The question arises: How reliant are we on this crucial mineral?
A 2020 World Bank report underscores the urgency, estimating a cumulative demand of 8 million tons by 2050—113% of known reserves. This figure is even more pressing when considering that as of 2020, the identified terrestrial resources of cobalt amounted to about 25 million tonnes. Notably, an additional 120 million tonnes lie beneath the Atlantic, Indian, and Pacific Oceans in the form of manganese nodules and crusts.
While cobalt is an abundant element, it is most commonly extracted as a co-product of copper and nickel. This linkage implies that its extraction is also dependent on the market dynamics of these metals. The cobalt supply chain is often cited as an example of potential risk stemming from geopolitical chokepoints, significantly owing to the fact that a staggering 70% of its production is sourced from the Democratic Republic of Congo (DRC).
Indeed, the DRC produced 73% of the world's cobalt in 2022, but we are expected to see its share reduce to 57% by 2030. Meanwhile, Indonesia's cobalt production is surging, reaching nearly 5% of the global production in 2022 and possibly increasing tenfold by 2030.
In 2022, global cobalt production totaled 197,791 tonnes, with the EV industry consuming 40% of this demand.
Compounded by economic and political instability, labor issues, and corruption, the cobalt supply from the DRC is unpredictable. Furthermore, with two-thirds of refinement capability anchored in China, the cobalt supply chain becomes especially vulnerable during periods of geopolitical tensions.
Investing in Cobalt: Opportunities Amidst Challenges
For investors considering how to invest in cobalt or exploring cobalt stocks to buy, understanding the global landscape is crucial. Despite the aforementioned supply concerns, opportunities for cobalt investment are abundant.
The cobalt institute and other authoritative entities have detailed information for investors interested in cobalt investments. However, potential investors need to be aware of the controversial aspects surrounding its extraction.
Cobalt Stocks
Glencore (LSE: GLEN)
Wheaton Precious Metals (TSX: WPM) (NYSE: WPM)
Vale S.A. (NYSE: VALE)
CMOC Group Limited (HKEX: 3993)
Cobalt Blue Holdings (ASX: COB)
Freeport-McMoRan (NYSE: FCX)
Sherritt International (TSX: S)
Jervois Mining Ltd. (ASX: JRV)
Canada Nickel Co (TSXV: CNC)
Horizonte Minerals (LSE: HZM) (TSX: HZM)
Electra Battery Materials Corp (CVE: ELBM)
Umicore (EBR: UMI)
Fortune Minerals (TSX: FT)
Nickel 28 Capital (TSXV: NKL)
What Drives Cobalt Prices Globally?
The global price of cobalt is influenced by a variety of factors, including:
Supply and Demand Dynamics: As with many commodities, the fundamental forces of supply and demand heavily influence cobalt prices.
Demand: The increasing demand for electric vehicles (EVs) and the broader electronics industry has driven much of the recent growth in demand for cobalt, given its role in lithium-ion batteries.
Supply: Geopolitical factors, mining policies, and production capacities can influence the availability of cobalt on the market.
Geopolitical Factors: The Democratic Republic of Congo (DRC) accounts for a significant portion of the world's cobalt production. Political instability, regulatory changes, infrastructure issues, and other regional factors in the DRC can lead to supply disruptions or uncertainties, which in turn can influence prices.
Ethical and Environmental Concerns: Concerns about the environmental impact of mining and ethical issues, such as child labor and poor working conditions in some cobalt mines, especially artisanal mines in the DRC, can affect purchasing decisions and lead to shifts in sourcing strategies by large corporations, impacting demand and prices.
Substitution and Research: As the price of cobalt rises, research into alternatives or technologies that use less cobalt intensifies. If successful alternatives are commercialized, they could reduce the demand for cobalt and affect its price.
Global Economic Conditions: The overall health of the global economy can influence cobalt prices. For instance, in periods of economic growth, demand for consumer electronics and EVs might increase, leading to higher demand for cobalt.
Stockpiling and Strategic Reserves: Countries or major corporations might stockpile cobalt, especially if they anticipate future supply disruptions or price hikes. This stockpiling can drive up prices in the short term.
Speculation: Like other commodities, cobalt is subject to market speculation. Traders' perceptions of future supply and demand conditions can influence current prices.
Battery Technology Trends: The design and chemistry of batteries evolve over time, influenced by research breakthroughs and market needs. Changes in battery technology that require more or less cobalt can affect its demand.
Regulatory and Policy Shifts: Policies that promote or inhibit the adoption of electric vehicles, renewable energy storage, or other technologies that rely on cobalt-containing batteries can impact demand. For instance, a country implementing strong EV incentives might boost demand for cobalt.
In sum, cobalt prices are shaped by a combination of technological, economic, geopolitical, and social factors, given its central role in modern battery technology.
What's Driving Indonesia's Cobalt Surge?
Indonesia's surge in cobalt production is primarily driven by its rapidly expanding nickel industry. Cobalt is produced as a byproduct of nickel mining in the country. The growing demand for electric vehicles (EVs) has also escalated the demand for batteries, which in turn, has increased the demand for metals like nickel and cobalt that are essential for battery production.
Indonesia, with its vast nickel reserves, has positioned itself to cater to this demand, resulting in a concurrent increase in cobalt production. The country's supportive policies, infrastructure development, and strategic moves to capitalize on the EV battery supply chain further propel this growth.
Controversies and the Way Forward
The extraction of cobalt, particularly in the DRC, has been marred with serious human rights issues, including child labor and perilous working conditions. Amnesty International's 2016 report unveiled the unsettling connection between some of the world's leading tech companies and these contentious mines. Though firms like Apple and Samsung SDI have taken steps to rectify these issues, many remain passive.
While cobalt prices have fallen by nearly 30% impacting DRC's economy, concerns about human rights abuses in cobalt mining persist. Regardless of these challenges, cobalt demand is projected to double by 2030, maintaining its essential role in the battery supply chain.
Innovation presents a potential way forward. From recycling cobalt from discarded batteries and using blockchain to ensure ethical sourcing, to the development of cobalt-free batteries, the tech industry's responsibility stretches far beyond the mere end product. It encompasses ethical sourcing and a profound respect for human rights.
Cobalt in America
The Australian-owned Jervois cobalt mine in Central Idaho, which suspended operations in March 2023 due to plummeting cobalt prices, has received $15 million from the U.S. Department of Defense. This funding will facilitate a more extensive study of cobalt at the site and the potential for a U.S. cobalt refinery.
Cobalt has become strategically significant since China controls most of the mining and refining. The mine could supply 10% of U.S. cobalt demand if production restarts, supporting both national security interests and the expanding electric vehicle industry.
The military funding is expected to help Jervois explore the cobalt resources and modernize its mapping, potentially moving it closer to reopening the mine. However, the Idaho cobalt mine, despite being a part of America's vision for a clean-energy future, struggles with economic realities, costing roughly $1 million monthly for maintenance.
How Do Other Countries Source Cobalt?
Countries source cobalt primarily through mining and recycling, with the specific method and source depending on their geological resources, technological capabilities, and economic considerations.
Domestic Mining: Countries with cobalt reserves can mine it domestically. This is the primary source for countries like the Democratic Republic of Congo (DRC), which has the world's largest cobalt reserves, as well as other countries like Canada, Australia, Russia, and others.
Byproduct Mining: Often, cobalt is not the primary mineral being mined. It's usually a byproduct of nickel or copper mining. Countries with significant nickel or copper mines, like Canada, Russia, Australia, or the Philippines, can obtain cobalt as a secondary product.
Imports: Countries lacking significant cobalt reserves or those needing more than they can produce will import it. These imports can be in the form of raw cobalt, partially processed cobalt, or more refined cobalt products. China, for instance, is a major importer of cobalt, even though it also mines some of its own.
Recycling: Cobalt can be reclaimed from used products, especially batteries. As the number of end-of-life lithium-ion batteries grows, recycling becomes an increasingly viable source of cobalt. Countries with advanced technological capabilities, like many in Europe, the U.S., and parts of Asia, are increasingly investing in battery recycling infrastructure.
Investments in Foreign Mines: Some countries or corporations from countries without significant cobalt reserves invest in mining operations abroad. For instance, many Chinese companies have investments in DRC's cobalt mines, ensuring a steady supply.
Stockpiles: Some countries maintain stockpiles of essential minerals, including cobalt, either to ensure supply during disruptions or as a form of economic strategy.
Diversifying Supply Chains: Due to concerns over supply chain stability, especially given the concentration of cobalt production in the DRC, some countries and companies are actively looking to diversify their sources of cobalt. This can mean seeking out new mining operations, investing in alternative sources, or forming partnerships with countries or companies in different regions.
Alternative Materials: While not a direct method of sourcing cobalt, ongoing research aims to reduce the reliance on cobalt in battery technologies. Some countries and companies are investing in research to find alternative materials or formulations that use less cobalt or none at all.
The approach to sourcing cobalt varies based on a country's resources, needs, and strategies. As the demand for cobalt grows due to its use in modern battery technologies, countries are likely to continue diversifying and expanding their sourcing methods.
Are There Cobalt-Free Battery Alternatives?
Yes, there are ongoing efforts to develop cobalt-free battery alternatives, mainly due to concerns about cobalt's ethical sourcing, its finite supply, and rising costs. Cobalt is often used in lithium-ion batteries, particularly in the cathode, due to its ability to improve energy density and cycle life.
However, the high cost of cobalt, ethical concerns surrounding its mining, and supply chain risks have driven research into alternative battery technologies and chemistries.
Some alternatives and research directions include:
Lithium Iron Phosphate (LiFePO₄ or LFP) Batteries: One of the most prominent cobalt-free alternatives is the LFP battery. These batteries do not contain cobalt and have a flat voltage discharge curve, which means their energy delivery is consistent throughout their discharge cycle. They are also known for their long cycle life and thermal stability.
However, the LFP typically has a lower energy density than other lithium-ion chemistries but is gaining traction in applications where energy density is less critical, such as stationary energy storage and some EVs. Tesla and BYD have shown interest in this technology for certain applications.
Lithium Manganese Oxide (LMO) Batteries: LMO batteries use a combination of lithium and manganese and do not require cobalt. They have been used in power tools and some hybrid/electric vehicles.
Lithium-Sulfur (Li-S) Batteries: These batteries promise higher energy densities than current lithium-ion batteries and do not use cobalt. They are still in the developmental phase and have challenges related to cycle life and durability.
Nickel-based chemistries: Some researchers are working on increasing the nickel content in batteries while reducing or eliminating the cobalt component. These chemistries include Lithium Nickel Manganese Cobalt (NMC) and Lithium Nickel Cobalt Aluminum Oxide (NCA). However, while the cobalt content is reduced, it isn't entirely eliminated in many of these variations.
Nickel-Manganese-Cobalt (NMC) with Reduced Cobalt: By tweaking the ratios of nickel, manganese, and cobalt, researchers are reducing the amount of cobalt needed. For example, moving from a 1:1:1 ratio to an 8:1:1 ratio reduces cobalt content significantly.
Nickel-Cobalt-Aluminum (NCA): While this still contains cobalt, it has a reduced amount compared to some other chemistries. Tesla uses this chemistry for many of its electric vehicles.
Solid-State Batteries: These batteries replace the liquid or gel electrolyte in a conventional lithium-ion battery with a solid electrolyte. This change can lead to batteries that are safer, have higher energy densities, and potentially use less or no cobalt. Several companies and research institutions are actively working on this technology.
Sodium-ion Batteries: Sodium is more abundant and cheaper than lithium. Sodium-ion batteries do not use cobalt, but they currently offer lower energy density compared to lithium-ion counterparts.
Magnesium-ion Batteries: These use magnesium ions instead of lithium ions, eliminating the need for cobalt. While they're still in the research phase, they offer the potential for higher energy densities and safety benefits.
Alternative Cathode Materials: Researchers are exploring other cathode materials, such as manganese or vanadium, to replace or reduce the cobalt content.
Research into other materials: Scientists are continuously researching alternative materials and chemistries that can either replace or reduce the need for cobalt in batteries. Despite the efforts to find alternatives, cobalt currently plays a crucial role in achieving high energy densities in lithium-ion batteries.
It's essential to understand that while these alternatives are promising, each comes with its own set of challenges, including technical barriers, manufacturing scalability, costs, and performance trade-offs. The transition to cobalt-free or reduced-cobalt designs in commercial products is a combination of scientific breakthroughs, market forces, and geopolitical considerations. As research continues and technologies mature, the battery landscape may see significant changes in the coming years.
Cobalt's Future
As the world leans into the era of sustainable energy and cleaner technologies, cobalt's role becomes more central. Investing in cobalt is not just about capitalizing on demand but also about fostering a future where its extraction and utilization align with global sustainable and ethical standards. For those looking at cobalt jobs or exploring cobalt investments, the path forward is both challenging and promising.
For more information on this topic, read the history of metals and mining for insights from Copper Age smelting to 21st-century recycling.
