Cobalt

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The Importance of Cobalt

Cobalt is a shiny and brittle metal that is used in the production of strong, corrosion and heat resistant alloys, permanent magnets, hard metals, and batteries. Cobalt is also one of the three naturally occurring magnetic metals on earth. Most lithium-ion batteries for portable applications are cobalt-based. An important advantage of the cobalt-based battery is its high energy density. It provides longer runtime than other battery types, making this chemistry attractive for powering our modern world. Cobalt-based batteries are used in cell phones, laptops, cameras, and electric cars. The industrial importance of cobalt resulted in the London Metal Exchange (LME) introducing cobalt futures contracts in 2010.

Cobalt Flying Under The Radar - Poised To Be The Best Performing Commodity Of The Next Decade

A primer on Cobalt by Palisade Research

"A stampede for cobalt"

Reuters

Battery demand has been the dominating factor behind the increase of cobalt demand growth in the past five years. With electric vehicles now becoming more popular than ever, growth should exceed global GDP growth for the foreseeable future, analysts at Macquarie say. Panasonic Corporation currently manufactures nickel-cobalt- aluminum cathodes in the batteries for Tesla’s electric vehicles. They have even gone so far as to say that cobalt-based battery chemistries will be the standard for the foreseeable future. Many other automakers are beginning to follow suit, and introducing new lines of electric vehicles which use the same type of batteries that require cobalt.

Bloomberg New Energy Finance forecasts that 35% of vehicles sold in 2040 will be entirely powered by electricity. With organic growth, battery usage is expected to account for an increasing proportion of cobalt demand, exceeding 50% in 2016, compared to 28% in 2010. Analysts at the Chinese information provider Antaike say over 77% of cobalt consumed by China was used in batteries last year. To date, lithium has garnered most of the attention in the battery sector; however, cobalt has virtually zero primary production and is an integral part of the lithium battery and electric vehicle story.

Source: Palisade - click to enlarge

"Demand forecasts can change quickly, and the main area which will define the cobalt market into 2020 and beyond is the changes in battery technology that will inevitably happen"

Macquarie

Source: Palisade - click to enlarge

Cobalt Supply

Cobalt supply is largely derived from copper and nickel production as a by-product. 64% of global cobalt production came from the Democratic Republic of Congo in 2012. China currently supplies roughly 62% of global refined cobalt. Almost all of China’s cobalt originates in the Democratic Republic of Congo, according to analysts at Macquarie - the highest proportion of commodity supply from a single country. In 2015, only 123,000 tons were mined globally, with total refined production at ~93,000 tons. The key takeaways to recognize are the lack of primary cobalt production globally, and the reliance on geopolitically risky jurisdictions for supply. Major copper and nickel producers have since suspended operations at multiple cobalt mines, and through 2007 to 2008, it led to a price spike from $15/lb to over $50/lb.

Source: Palisade - click to enlarge

"Cobalt's demand growth profile remains one of the best among industrial metals peers. Its exposure to rechargeable batteries continues to play a crucial role."

Macquarie

Cobalt Price - 6-year

Cobalt Price - 3-year

Cobalt Price - 1-year

Data source: Dalton Commodities - click to enlarge