Mike Beck: Cobalt – The Most Supply Constrained Commodity on Earth, By Far
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Mike discusses the cobalt market which is part of four critical metals used in batteries and why it is of particular interest. Total world mine supply is around 100,000 tons which are currently split evenly between batteries and alloys. Furthermore, 65% of current supply comes from the Congo a country that can be politically unstable. Secondly, 99% of cobalt production comes as a by-product of mining copper and nickel. The average copper and nickel mines total production will only result in 5% to 10% cobalt. If the price of cobalt rises, it does not necessarily incentivize new supply.
If you examine the electric vehicle adoption rates which most estimate that by 2025 will be 15% of all passenger vehicles, the world will need three times current supply. Unless copper or nickel prices dramatically increase it’s unlikely there will be any material increase in cobalt supply.
Cobalt prices have risen in the last year from $10/lb to $30/lb which is only slightly above the historical average of $24/lb. Mike expects further price increases in 2018 and a severe shortage will likely manifest in the supply chain.
Tesla with their model 3 plan to produce 500,000 vehicles per year. Each car uses 10kg of cobalt. That is 5000 tons of cobalt that is presumably required which is 5% of total mine supply. That is demand from one car model and one manufacturer. If you extend that out to other manufacturers, you quickly see how dramatic shortages can emerge. Recently Volkswagen put out a public tender for ten years of cobalt supply, and they received no bids.
Battery manufacturers are re-engineering the chemistry ratios which will help ease cobalt requirements. There are still significant technical challenges, and it will take several years.