Cobalt to Remain Key EV Raw Material Despite Substitution Threats

Weaker market conditions have put cobalt prices under pressure in the past few months, but the long-term outlook for the key battery metal remains robust, says the Cobalt Institute in its latest market report.

“The cobalt industry is optimistic the cobalt market will continue to grow in the coming years, driven by the success of cobalt’s use in superalloys and hard metals, and particularly in electric vehicles (EVs),” Caroline Braibant, interim director general at the Cobalt Institute, said. “Cobalt-containing batteries are key for EVs safety, performance and stability — a factor that will continue to define consumer preferences in Europe and North America.”

The report, prepared by Benchmark Mineral Intelligence for the Cobalt Institute, forecasts that cobalt will remain a key raw material for the entire battery supply chain, despite the persistent theme of substitution in battery applications.

“Multiple cell formulations (mostly nickel-cobalt-manganese and lithium iron phosphate) will support the major end-use sectors, with no single battery cell technology expected to dominate,” the report states.

Last year, demand for cobalt saw a slight increase compared to 2021, rising by 21,000 tonnes to 187,000 tonnes. Battery applications now account for 72 percent of cobalt demand, up from 55 percent in 2018 and 70 percent in 2021.

“After being neck and neck in 2021, the EV sector is now by far the largest cobalt consumer after pulling ahead of portable electronics — it now accounts for 40 percent of total cobalt demand, with this share continuing to rise,” the report reads.

Looking over the supply side, last year mined cobalt output grew faster than in 2021, with the Democratic Republic of Congo remaining the leading producer worldwide. Indonesia took over the second spot in 2022, leaving Australia and the Philippines behind.

“Having produced minimal volumes prior to 2021, Indonesia’s rise has been fast owing to existing mining expertise in the country from other commodities and the successful construction and ramp up of HPAL capacity, producing cobalt and nickel, from Chinese-Indonesian companies,” as per the report.

Cobalt supply reached close to 198,000 tonnes in 2022, up 21 percent year-on-year.

But a main trend that will continue to impact the cobalt market is governments around the world pushing for more localized supply chains. The US Inflation Reduction Act and Europe’s Critical Raw Materials Act are just a couple of examples of how legislation could shape the building of supply chains that are less reliant on Asia.

“China dominates processing of critical battery raw materials — regionalized supply chains particularly in North America and Europe need to be developed, requiring significant investment and cooperation,” the report reads.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.