EVs to Weather COVID-19 Storm, Cobalt to Benefit in the Long Term

Uncertainty caused by the coronavirus has changed supply and demand dynamics for every commodity, including battery metal cobalt.

Demand for cobalt is driven by the electric vehicle (EV) story, which has been hit as automakers struggle to survive the economic impact of the outbreak.

But for cobalt producer Eurasian Resources Group (ERG), EVs are weathering the COVID-19 storm better than internal combustion engine vehicles.

“(As a result), lithium-ion battery demand stands to benefit, and cobalt — as an integral part of these batteries — will be in high demand in coming years,” CEO Benedikt Sobotka said in a statement.

“This sentiment is reflected in cobalt prices which, as of 20 April, continue to trade slightly higher than at the beginning of the year, unlike many other metals which have seen double digit price drops over the same period,” he continued.

ERG operates the Metalkol Roan tailings reclamation copper-cobalt project in the Democratic Republic of Congo (DRC), which is set to become one of the world’s leading cobalt producers and one of the largest suppliers of cobalt to China, according to the company.

In the DRC, the company processes the ore at the Boss Mining, Frontier and Comide operations. Additionally, ERG has a number of development and near-production assets in the African country. In Zambia, ERG owns Chambishi Metals, its central cobalt and copper refinery.

Speaking about the EV revolution, Sobotka highlighted the fact that over the past couple of years, the drive towards EVs has been relentless, with tens of billions of dollars committed to the electrification of new model offerings.

The path toward EVs has not been an easy one for automakers, which have faced challenges related to opaque government subsidies and the need to transform traditional supply chains.

“Clarity around incentives may not yet be achieved, but governments appear eager to continue to promote the electrification of transportation,” Sobotka said. “For governments, it may make sense to use a crisis of these proportions to speed up a change which is already viewed as inevitable.”

The CEO of ERG, which is also co-chair of the Global Battery Alliance, believes automakers should use this season to reevaluate long-term strategies.

“Certainly, there is a growing appetite for electric vehicles. Although these are distressing times, it is also a chance to restructure supply chains and take more decisive steps towards embracing electric vehicles.”

For its part, ERG has implemented global preventive measures to ensure the smooth running of operations and the safety of its people amid the COVID-19 virus outbreak. In Africa, aside from preventive measures, the company said plans are currently being drawn up to establish a quarantine area should the need arise.

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