Volkswagen’s failure to secure long-term cobalt supplies has highlighted concerns over one of the most precarious elements in the lithium-ion battery supply chain.
There is sufficient cobalt worldwide to meet foreseeable demand for the mineral, according to Caspar Rawles, an analyst at Benchmark Mineral Intelligence. The real question “is whether we can access it quickly enough,” he said.
Volkswagen last month sought to secure a €50 billion ($59 billion) contract to supply enough cobalt for 150 gigawatt-hours of lithium-ion battery storage by 2025, which Rawles said could amount to roughly 30,000 tons of the metal a year.
“To put that into perspective, the refined material supply globally for cobalt last year was 93,000 tons,” he said. “It’s approximately a third of last year’s entire global supply. When you look at it like that, you start to think there are potentially problems going forward.”
The German carmaker failed to find a supplier that would guarantee even five years of cobalt at a fixed price, the Financial Times reported this week. But that possibly says more about market dynamics than the possibility of a supply-chain breakdown.
“Perhaps they underestimated the market,” said Rawles. “The big auto manufacturers have for years been able to put quite stringent terms [on] the material they need for traditional vehicles. But when demand is expected to grow, producers don’t want to sign those long-term deals.”
The current supply of cobalt is restricted not so much by the availability of the mineral, but by the cost of extracting and processing it, he said. Already, two major mining projects could help increase supply if the business case were strengthened by an uptick in demand.
One of them is Katanga, owned by the mining giant Glencore. The mine is currently undergoing upgrades to reduce costs, but has “the potential to become Africa’s largest copper producer and the world’s largest cobalt producer,” Glencore told Reuters in February.
Rawles estimated the mine might add 15,000 tons of cobalt a year to the market when it reopens, which could be next year.
A further 14,000 tons a year is expected to come from the first phase of the Metalkol Roan Tailings Reclamation project being developed by Eurasian Resources Group, which Rawles said is due to start production in 2019. Output from the project could ultimately top 21,000 tons a year, he said.
Both these projects are in the Democratic Republic of the Congo (DRC), which is already the source of 64 percent of global cobalt supplies and which is seeing mounting civil unrest over President Joseph Kabila’s delays in allowing a long-overdue general election.
Although any administration in the DRC would likely do its utmost to protect copper and cobalt mining because they account for almost 80 percent of the nation’s revenues, the country’s political situation is clearly a worry.
Several other new cobalt mining developments are planned in other countries, said Rawles, but none amount to more than around 3,000 tons of output a year. Outside DRC there are reserves in more than a dozen other countries, including China, Canada, the Russian Federation, Australia and Cuba.
Cobalt mining has taken off in the DRC because it's associated with copper, which can be extracted at a profit. Cobalt mining hasn't been mined extensively elsewhere because it's associated with nickel, which is harder to mine profitably.
The value of nickel is expected to rise, though, thanks to its use in nickel-manganese-cobalt (NMC) cathodes for electric-vehicle batteries.
And battery manufacturers are starting to play with the relative proportions of nickel, cobalt and manganese in a way that could help the supply chain. Initially, NMC cathodes were designed with a 1-1-1 ratio of each material.
“We’ve moved from that to 5-2-3, so more nickel, less cobalt,” Rawles said. “8-1-1 is where the industry is looking at the moment.”
Achieving such a mix could shorten battery lifespans, he said. But at the same time it would increase energy density, something the electric vehicle industry is very keen on. Above all, though, “the move to 8-1-1 is [being] pushed by cost,” said Rawles.
“Looking into the mid-2020s, the demand for nickel, if we move to these higher formulations, could be significant enough to push the price up," he added. "That’s when you’ll start potentially seeing nickel-cobalt projects coming on-line.”