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The rise of electric vehicles and the cobalt conundrum

The rise of electric vehicles and the cobalt conundrum

The electric vehicle exuberance has been gaining traction in recent years. Governments are setting ever more aggressive targets on internal combustion engine bans, while automakers have been jockeying to outdo each other by laying out bullish production plans for new electrified models.

COBALT, A KEY input material for some of the most prominent lithium-ion batteries, should be riding high on the electric vehicle (EV) wave. Yet, the outlook for cobalt has waxed and waned over the last year or so. Announcements by those in the cobalt supply chain, from miners through to battery makers and auto manufacturers, have all bu eted the small, concentrated and previously overlooked ‘blue metal’ industry.

Indeed, as the full ramifications of the EV story started to be realised last year, medium-term fundamentals looked increasingly tight, with even Tesla’s own aspirations appearing unachievable. Then late last year, Glencore came along and blew away notions of market tightness with its announcement that its Katanga mine restart would add 34 kilotons per annum to the market – equivalent to around one-quarter of the current market.

As we have moved through 2018, bullish projections for the uptake of new battery types with low cobalt and Tesla’s predictions that it could go ‘cobalt free’ further tempered sentiment. Meanwhile, falling spot prices in recent weeks have certainly not helped. Yet, it seems that rumours of the death of cobalt have been greatly exaggerated. And while we may see medium-term respite for the cobalt market thanks to Glencore, ERG and others, the long term still looks increasingly tight.

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