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The revolution in battery technology and the concurrent marketing has resulted in unprecedented demand growth for “all things electrical” from toys to grid storage, with EV’s leading the “charge”. This has spurred production by various battery manufactures to expand production capacity in the form of “gigafactories”; which of course has resulted in greatly increased demand for critical commodities such as cobalt. A supply side issue of social consciousness has developed around cobalt, as an estimated 65% is suppled from the Democratic Republic of Congo (“DRC”) and of that supply, an estimated 20% is from primary sources incorporating child labour. Secure and ethical sourcing of cobalt has become a major focus for many of the end consumers.


Cobalt’s key characteristics of high-energy density and its retention of strength and magnetic properties at high temperatures make it ideal for two key end products:


Metallurgical cobalt is the second largest cobalt market and is used to produce superalloys for industrial applications where heat resistant, surface stability, and corrosive and oxidation resistant materials are essential.

Rechargeable Batteries

Cobalt’s unique low thermal and electrical conductivity properties are why batteries with cobalt based chemistries have the highest energy density and improved longevity.  A key result is the ability to store large amounts of energy in a small area. This makes the batteries light-weight and helps EVs achieve maximum driving range, a critical factor. Cobalt also increase the safety of lithium-ion batteries.


Experts forecast an average of 9% CAGR for cobalt over the period 2016 to 2022 (from a current 2017 demand of 107 kt to 160kt). 49% of 2017 demand was used in battery manufacturing; the lithium-ion battery is forecast to increase consumption to 62% of demand by 2022. This increase in demand is being driven consumer shift towards EV’s over traditional internal combustion engines.

Could the internal combustion engine be on its last lap in certain regions?

Many cities or states have announced what the media has termed “bans” on internal combustion or diesel engines – however, no region has actually passed laws prohibiting anything.

Most of the “bans” on combustion engines are actually restrictions on the sales of new diesel vehicles, along with financial incentives or penalties to accelerate sales of electric and alternative-fuel vehicles in the coming years. European countries have passed the most aggressive policies to tip the scales against gasoline and diesel engines.

That doesn’t make the reports meaningless – the real message is to carmakers and to car buyers to “get ready” – governments are signalling to the world that the need to move to zero emission vehicles is real and if needed, they are prepared to force the issue by legislation.

Elsewhere the pronouncements are, at best, aspirational, however the effects are rippling through the auto industry regardless. In the last two years, carmakers have rushed to roll out plans to electrify their vehicles. Daimler will spend $11.7 billion building 10 all-electric and 40 hybrid models with plans to electrify its entire lineup. Volkswagen AG aims to electrify its 300 or so models by 2030. Ford says it’s “all in” on EVs, while GM is adding two more electric models alongside the Chevy Bolt, eventually ditching the combustion engine altogether. China’s Volvo is only releasing electric models starting in 2019.

Below is a crude table of regions that have announced bans:


Constraint in supply is likely to persist for some time. The 65% of cobalt production from the DRC, presents operating, financial, security and reputational risks for mining companies and end users. Additionally, cobalt is rarely found in high concentrations and is mostly produced as a byproduct of copper and nickel. Limited new investment in these two commodities will only increase supply challenges for cobalt.


The auto industry is “waking up too late” to the fact that China is tracking to become the world’s go to supplier of cobalt for the rechargeable battery, Ivan Glasenberg, CEO of top metal producer Glencore, stated according to a Reuters report. 

“If cobalt falls into the hands of the Chinese, you won’t see EVs being produced in Europe etc. They (the car manufactueres) are waking up too late … I think it’s because the car industry has never had a supply chain problem before,” Glasenberg told the FT Commodities Global Summit in Lausanne, Switzerland.

The Democratic Republic of the Congo today has six of the top 10 cobalt mines globally. Due primarily to Chinese investment, by 2022, the central African nation will host the nine largest cobalt producers. Congo also holds half the world’s reserves.

Not only is primary production highly concentrated, but the downstream industry is beginning to resemble a monopsony. China, despite having no cobalt resources of its own, is responsible for 80% of the world’s cobalt chemical production.

Glasenberg told FT Chinese refiners and processors “will have most of the offtake of cobalt”:

They’re not going to sell batteries to the world, more than likely they’ll produce batteries in China and sell electric vehicles to the world,” Mr Glasenberg told the conference.

Beijing has made electric vehicles a centerpiece of its war on pollution. It also wants the sector to spearhead the country’s Made in China 2025 innovation drive.

The China-Congo-Cobalt-nexus poses particular problems for automakers in the US and Europe. Not only in terms of securing supply but also the growing consumer awareness of ethical sourcing of materials.

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