VANCOUVER (miningweekly.com) – Sourcing conflict-free cobalt for application in new technologies, such as lithium-ion batteries, will remain both a concern and an opportunity for manufacturers for years to come, as production is dominated by the politically unstable Democratic Republic of Congo (DRC).
The Central African country, which has a long and well documented history of political conflict, produces about 64% of the world’s cobalt, while China accounts for about 57% of global refined supply.
Benchmark Mineral Intelligence analyst Caspar Rawles told an audience in Vancouver on Friday that it was unlikely that companies could sidestep cobalt supplies emanating from the DRC, which is expected to account for 69% of global supply by 2020.
The real supply growth is set to come from inside the DRC, as projects such as Glencore’s Katanga come back on line.
“This leaves a key space for juniors in the market, who can break in to the market by following the value-added strategy of producing battery products such as cobalt sulphate, or brand their product as ‘conflict free’ – something there will be a significant demand for,” he says.
He notes that lithium-ion batteries do not contain cobalt metal, but rather cobalt chemicals, and it is the demand for these cobalt chemicals that is pushing prices higher.
According to Rawles’ research, artisanal cobalt production accounts for about 10%, or 7 000 t, of the DRC’s output, and conflict cobalt – cobalt produced through forced labour – comprises about 5%, or 3 500 t, of production.
He is quick to note that ‘artisanal’ cobalt does not necessarily equate with ‘conflict’ cobalt, despite the stigma the industry has to deal with. On the flip side, most new production coming on line in the DRC can be guaranteed clean, he says.
Rawles estimates that the lithium-ion battery market will grow to about 170 GWh by 2020, up from 70 GWh in 2016, with cobalt-containing cathodes accounting for 81% of the market.
Benchmark expects cobalt demand for lithium-ion batteries to grow at an average compound yearly growth rate of 11.7% between 2016 and 2020.
Supply is expected to remain tight through to 2020, with a growing deficit emerging from 2023. However, new production coming on stream will start shrinking the deficit from 2025 onwards.
While there are alternatives to using cobalt in batteries, it currently accounts for about 52% of the market, and is expected to expand to 59% by 2020.
However, cost reduction initiatives are driving research on cobalt substitution in cathode and cell manufacturing, but so far these alternatives have proven problematic owing to safety and life cycle issues, Rawles said.
Substitution will only result in a reduction in cobalt demand, and not replacement by 2030. In fact, even at reduced levels, the cobalt market is set to expand rapidly.
Rawles highlights that cobalt supply disruption (such as turmoil around the upcoming DRC election later this year) is a critical factor that could accelerate a reduction in cobalt applications. About 98% of cobalt is mined as a by-product of copper and nickel, which also leaves it vulnerable to the welfare of these markets.
London Metals Exchange cobalt prices have jumped about 60% so far this year to more than $55 000/t, but Rawles points out this is not what cathode manufacturers pay. Instead, they pay prices derived from the metal price, plus or minus a premium. Benchmark expects to publish a price for the industry commodity, cobalt sulphate, soon.
Rawles presumes cobalt prices to remain high and perform well out to 2020, as demand will lead supply to 2025, and new projects coming on line will not be enough to create an oversupply.
He foresees a greater supply deficit in the early 2020s than in 2007/8, when the deficit was about 9 000 t, which caused prices to spike by more than $50/lb.