Electric vehicles overtook smartphones and personal computers for the first time last year as the main source of demand for cobalt, a rare metal used in lithium-ion batteries.
The automotive industry consumed 59,000 tonnes of cobalt in 2021, or 34 per cent of total demand, as sales of electric and hybrid vehicles doubled, according to a report by the Cobalt Institute.
That outstripped the 26,000 tonnes of metal used in mobile phone manufacturing and 16,000 tonnes in laptops and tablets. Total demand for cobalt was 175,000 tonnes against mined supply of 160,000 tonnes.
The mismatch in those figures highlights one of the biggest challenges facing the automotive industry as it goes electric: securing enough raw material. As more electric vehicles are rolled out, concerns are mounting about potential supply crunches for crucial battery metals from cobalt to lithium and nickel. Demand from the car industry is expected to account for half of the cobalt demand by 2026.
Cobalt is seen as particularly problematic because it is a byproduct of mining copper and nickel, and supply is very concentrated by geography and company.
Almost three-quarters of the world’s mined cobalt supply comes from the Democratic Republic of Congo, where production is dominated by Chinese companies and London-listed Glencore. The Cobalt Institute report shows that the central African country produced 118,000 tonnes of cobalt in 2021 — significantly more than the next largest supplier, Australia, at just 5,600 tonnes.
That has fuelled speculation about whether a big carmaker might acquire a miner. Tesla’s chief executive Elon Musk told an industry conference last week that he was open to the idea.
“It’s not out of the question,” he said at the FT Future of the Car Summit. “We will address whatever limitations are on accelerating the world’s transition to sustainable energy. It’s not that we wish to buy mining companies, but if that’s the only way to accelerate the transition, then we will do that.” Tesla has a goal of producing 20mn electric vehicles annually, up from 1mn last year.
A growing number of electric cars in China — the world’s largest EV market — are powered by lost-cost lithium-iron phosphate batteries, which generally have inferior range and performance. But the top models in the US and Europe are still dominated by nickel-cobalt chemistries. These batteries accounted for three-quarters of global EV demand in 2021, according to the report.
“Cobalt-containing batteries are a technology of choice for many car manufacturers in Europe, North America and China,” said Adam McCarthy, president of the Cobalt Institute.
Looking ahead, the institute sees cobalt demand hitting 320,000 tonnes in the next five years, up from 175,000 tonnes in 2021, as the car industry produces more battery-powered vehicles.
While supply is expected to pick up this year and in 2023, leading to a more balanced market, the Cobalt Institute says it will start to slow from 2024, leading to large deficits. “From 2024-26 supply growth will average 8 per cent per year, compared to more than 12 per cent for demand,” the report projected.
The price of cobalt doubled last year, rising from $16 a pound to $32/lb on the back of strong demand from the automotive sector and supply disruptions. It is currently trading at $37/lb.
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