Cobalt is in short supply globally
The surge in the cobalt price, which increased by 119% in 2021, is expected to continue unabated this year, with cobalt supply increasingly unable to keep pace with demand, diversified mining major Eurasian Resources Group (ERG) CEO Benedikt Sobotka said in a statement on January 27.
The global price of cobalt more than doubled last year, reaching its highest levels since 2018, he noted.
“The market is severely short of the blue metal. There are no discernible signs of any fundamental easing, with prices remaining on an upward trajectory as consumers skirmish to secure sparsely available spot units – a situation that will undoubtedly persist throughout 2022 and beyond,” Sobotka remarked.
He said the short supply was underscored by significant demand growth in the electric vehicle (EV) sector.
“The pace of EV adoption shows few signs of losing momentum, being supported by the global transition to a greener future. We firmly believe that future EV sales will continue to exceed analysts’ expectations, driven by governments’ ambitious adoption goals and manufacturers’ aggressive sales targets,” Sobotka said.
He said ERG expected EV sales’ market penetration to exceed 50% by 2030, which is in stark contrast to most analysts’ “conservative” forecasts of about 30%.
“Perhaps an even more powerful force for change will be consumers’ booming receptiveness to EVs, incentivised by their performance benefits, lower running costs, improving range, strong environmental credentials and – perhaps most importantly – falling prices relative to their petrol and diesel counterparts,” Sobotka pointed out.
However, the EV sector is not the only cobalt demand driver. Cobalt-bearing lithium-ion batteries are increasingly being used in various sectors, from mobile electronics to battery-based energy storage systems.
Sobotka said demand from traditional cobalt metal end-use sectors, which account for about a quarter of overall consumption, is set to undergo a boom this year. This boom would be spurred by the recovery of the aerospace sector after the downturn caused by Covid-19 travel restrictions.
The International Air Transport Association forecasts that global air travel demand will grow by 52.5% year-on-year in 2022. Additionally, aeroplane manufacturers Boeing and Airbus have both announced ambitious production targets for the year ahead.
Sobotka attributed cobalt’s demand/supply discrepancy to new gigafactories popping up faster than new industrial-scale cobalt mines can be developed. Battery production capacity was expected to quadruple by 2025, despite cobalt supply lagging far behind.
“Downside risks surround the timely commissioning and ramp-up of many existing projects, in view of global shortages of mining equipment and the adoption of the historically troublesome high-pressure acid leach technology at numerous mine projects in Indonesia,” Sobotka pointed out.
He added that the responsiveness of artisanal cobalt supply to elevated prices has been reduced by consumers’ growing scrutiny of the cobalt supply chain, facilitated by new blockchain tracing solutions – such as the Battery Passport and Re|Source – as well as the Democratic Republic of Congo government’s efforts to introduce stronger controls in the sector.
Finally, Sobotka noted that the movement and availability of cobalt raw materials continued to experience logistical disruptions, which he said were likely to persist throughout the course of this year.