Why African Cobalt will continue to dominate the EV battery space?

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Date: 21/02/2019

Venue : Worley Parsons, 39 Melrose Blvd, Melrose Arch

Host: SAIMM and Core Consultants

Presenter: Lara Smith, Managing Director, Core Consultants

The Southern African Institute of Mining and Metallurgy (SAIMM) hosted a Breakfast discussion on the 21st of February 2019 in Melrose Arch. The topic of discussion was “Why African Cobalt will continue to dominate the EV battery space”. The Competence Centre for Mining and Mineral Resources from the Southern African German Chamber of Commerce and Industry attended the event. Lara Smith from Core Consultants gave a presentation and this was followed by a question and answer session. 

Cobalt deposits occur all over the world, but the most geologically attractive deposits are found in the African Copper Belt. 60% of global cobalt supply from primary sources is from the Democratic Republic of Congo (DRC). 60% of cobalt is mined as a by-product of copper, 38% as a by-product of Nickel and 2% from primary cobalt mines. China controls the majority of refined global cobalt output and gets 90% of its supply from the DRC.  

In 2016, global cobalt demand was 93,950 tonnes and was expected to reach 120,000 tonnes per annum by 2020 (Darton Commodities, 2016). Global cobalt demand is driven by a wide range of applications including batteries, nickel alloys, tool materials, catalysts and magnets. From 2017, the Cobalt Concentrate and Cobalt Metal prices rallied with metal prices reaching a high of USD90, 000/t in the first half of 2018. The price growth was a result of expected demand for Lithium-ion batteries used in Electric Vehicles (EV’s), fears over long term access to cobalt resources as a result of instability in the Democratic Republic of Congo (DRC), physical stockpiling and major consumers looking to secure future sources for supply.  

Since the record prices in 2018 Cobalt prices have collapsed with concentrate prices declining 55% and metal prices declining 53% since February 2018. One of the reasons for this is that China has been drawing down stocks during the last 6 months to meet demand and not consuming supply from primary producers. Furthermore, demand growth for Electrical Vehicles (EV) has not met expectation and this has further weighed down the price. Other factors that have driven the price down are Chinese/US trade relations, the fact that global credit has eased since mid-2018 and other market factors. According to Lara, as a result of these and other factors, the price of cobalt is expected to continue its depression in the short term. Asia holds15% of global stockpiles and could unwind its position if Electrical Vehicle demand continues to fall below expectation and this will drive the price down further. The medium to long term outlook for Cobalt is positive as China continues to add Cobalt Sulphite Capacity and Battery Manufacturing Capacity. The medium term outlook is that EV adoption rates are expected to grow globally with Asia leading the way, followed by Europe and then the USA.   

In the short term, Cobalt supply risks are mitigated by geological and metallurgical factors as Copper and Cobalt generally occur together in the Zambian/DRC copper belt and adjustments in plant configurations will ensure supply levels are maintained and grown from existing primary sources. To add to this, global stockpiles are healthy and, as a consequence of the price depression, new projects are unlikely in the short term. Thus Africa is expected to continue to dominate the EV battery space.