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The rising price of cobalt: Why?

cobalt

The Demand

Recently, cobalt prices have increased and are set to continue as the industry struggles to meet the rising demand from batteries used in electric vehicles, says BMO Capital Markets. Lately, it’s been suggested that the demand could be about to surge from 2k tonnes today to over 300k tonnes in 2030. Meaning a 14,900% increase in demand.

The growth in the demand for cobalt over recent years has been down to continued growth in smartphone sales. Simply because smartphone batteries are still the main end use market for cobalt. However, with the rising interest in electric vehicles, automakers like Tesla, GM, and BMW, have started to produce electric cars on a mass scale, meaning they have an increasing need for cobalt.

Basically, this means that cobalt is never going to be cheap again, simply because of the electric vehicle revolution.

Four reasons why you should keep an eye on the rising prices of cobalt

1. Demand Surge

There are over two million electric vehicles already on the worlds roads, and automakers are only getting started. The shift toward electric vehicles depends on cobalt, since it makes up some 35% of the lithium-ion battery mix. Therefore, meaning that every single vehicle manufacturer will have to build their own cobalt pipeline eventually.

The automotive industry’s focus has definitively shifted to electric vehicles, and everyone’s playing a furious game of catch-up with Tesla. It’s become clear that this shift is permanent, because of several reasons:

  • Tesla has stated that they will manufacture 500,000 electric vehicles a year.
  • General Motors in America has announced an ‘all-electric’ future, with plans to launch 20 electric vehicle models by 2023.
  • Renault is set to double their electric vehicle offerings in the next five years.
  • The VW Group plan to invest an enormous £84 billion in electric vehicles, with a target of introducing 300 electric vehicle models into the market by 2030.
  • Ford has created a new ‘Team Edison’ group solely focusing on electric vehicle development, with plans to introduce 13 new models by 2023.
  • By 2022, Renault, Nissan and Mitsubishi, collaboratively, plan to have 12 electric vehicles introduced into the market.

These electric vehicle efforts alone take more cobalt than what the world can currently supply. Therefore, Volkswagen for one, has secured long-term supply of cobalt, seeking a 10-year secured pipeline beginning next year in 2019, according to Reuters.

2. China

It’s clear that China alone will seriously challenge global cobalt supplies. Currently, China is the largest consumer of cobalt in the world. From 2017 to 2021, it is expected that China will see a 12% increase in cobalt consumption, mainly due to the growth of electric vehicles.

Cobalt prices seen a 150% price surge in 2017, due to the China-led electric vehicle growth spurt. In addition, China too leads the way with super restrictions on conventional vehicles to crack down on pollution. Therefore, making China not only the largest market for plug-ins, but also the largest producer.

3. Tight supply of cobalt

Currently, the global cobalt market is facing a tight supply, with this set to remain through to 2021 when the supply gap is expected to reach 12,000 tons, according to Research and Markets. It is for this reason that cobalt prices have been are set to further increase.

Future supply is uncertain. Especially since 60% of the world’s cobalt is sourced from the DRC, where it’s mined by children under inhuman conditions. Therefore, forcing many buyers to seek their supply elsewhere.

With this tight supply situation set to continue, prices are set to continue their upward rise.

4. Demand is uncertain

Despite having a clearly outlined supply and demand picture, many believe that demand remains inconspicuous. However, China is a huge factor in the supply/demand reckoning, as they believe that it goes far beyond electric vehicles.

With this outlook, China has introduced a ‘5 Year Plan’ to push for up to 15% of power to come from non-fossil fuels. Making another vast push for electric, and another major consumer of cobalt.

It’s became clear that the demand for cobalt isn’t just about the electric vehicle uprising, it’s an energy revolution story, with cobalt positioned directly in the centre of it all.

Goudsmit UK

Goudsmit UK supply custom Samarium Cobalt magnets and magnetic assemblies to suit your requirements. Contact us today for more information at dean@goudsmit.co.uk, or if you’d like to speak to a member of our team for advice about your magnetic component design, contact us at +44 (0) 2890 271 001.

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