Market insights by Abhijit Mhalsekar
Market Insights
As the world moves to invest in clean technologies and away from carbon intensive fossil fuels, there has been an increase in the demand for battery metals such as lithium, nickel and cobalt. The declining price from its high of 95,000 US$ per tonne can be attributed to the content of the cobalt being slashed in the battery composition and the looming pandemic.
Glencore, the largest cobalt-mining company in the world, will reopen Mutanda, one of the world's biggest cobalt mines, with plans to be completely operational from 2022. Earlier this year, state-owned (DR Congo) Enterprise Generale du Cobalt, which holds monopoly rights to trade cobalt from artisanal mining sites which are responsible for 20% of Congo’s exports, secured financing from Trafigura for 5 years. Artisanal mining sites have been the centre of attention for ethical sourcing issues due to controversies pertaining to child labour and improper (perilous) working conditions. The opening of the mine and the supply of cobalt through such deals will help to balance cobalt prices by 2023.

Source: Bloomberg
The demand for cobalt will increase due to strong demand from electric vehicles, consumer electronics and 5G mobile phones. There was a two-thirds increase in the registration of new electric
vehicles which increased the stock of electric vehicles by 43% compared to 2019 (IEA 2021). Cobalt is a by-product of copper (55%) and nickel (35%). Therefore the investment decisions are tied to investment in copper and nickel. Cobalt as a metal is not directly used in the batteries but is used as an inorganic compound called Cobalt hydroxide.

According to the IEA report (2020), around 19 kt of cobalt was utilised for batteries and they estimate the cobalt used will be 10 times that by 2030. The future demand is dependent on the chemistry of the cathode used in the battery, Nickel-ManganeseCobalt (NMC), Nickel-Cobalt-Aluminium (NCA) and Lithium Iron Phosphate (LFP). Around three-fourths (IEA 2021) of the batteries are produced with NMC cathodes. NMC 622 or NMC 811 are preferred compositions due to the low content of cobalt which reduces the overall battery cost. The EV industry is in the race to bring the costs to under 100$/kw.
Tesla uses NCA as their prime composition for their battery technology and aims to eliminate cobalt, opting to use batteries with LFP in the Chinese market. NMC based batteries provide higher performance, which explains Tesla’s deal with Glencore for the supply of cobalt.

MARCH, 16 / 2021
Abhijit Mhalsekar
ESG Research Analyst

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