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Electric vehicles overtake telephones as main source of cobalt demand

Electric vehicles overtake telephones as main source of cobalt demand

Electric vehicles first overtook smartphones and personal computers as the main source of demand for cobalt, a rare metal used in lithium-ion batteries last year.

According to a report from the Cobalt Institute, the auto industry will have consumed 59,000 tons of cobalt by 2021, or 34 percent of total demand, as sales of electric and hybrid vehicles doubled.

That surpassed the 26,000 tons of metal used in cell phone manufacturing and 16,000 tons in laptops and tablets. The total demand for cobalt was 175,000 tons, while the supply from mines was 160,000 tons.

The mismatch in those numbers highlights one of the biggest challenges the auto industry faces as it goes electric: securing enough raw material. As more electric vehicles are rolled out, concerns are mounting about potential supply shortages for critical battery metals, from cobalt to lithium and nickel. Demand from the automotive industry is expected to account for half of cobalt demand by 2026.

Cobalt is considered particularly problematic because it is a by-product of copper and nickel mining, and its supply is highly concentrated by geography and company.

Nearly three quarters of the world’s mined cobalt comes from the Democratic Republic of Congo, where production is dominated by Chinese companies and London-listed Glencore. The report from the Cobalt Institute shows that the Central African country produced 118,000 tons of cobalt in 2021 – significantly more than the second largest supplier, Australia, at just 5,600 tons.

That has fueled speculation about whether a major automaker could acquire a miner. Tesla CEO Elon Musk told an industry conference last week that he was open to the idea.

“It’s not ruled out,” he said at the FT Future of the Car Summit. “We will address all constraints accelerating the global transition to renewable energy. It’s not that we want to buy mining companies, but if that’s the only way to accelerate the transition, then we will.” Tesla aims to produce 20 million electric vehicles annually, up from 1 million last year.

A growing number of electric cars in China – the world’s largest EV market – are powered by cheap lithium iron phosphate batteries, which generally have inferior range and performance. But the top models in the US and Europe are still dominated by nickel-cobalt chemistry. According to the report, these batteries accounted for three quarters of the global demand for electric vehicles by 2021.

“Cobalt-based batteries are a technology of choice for many automakers in Europe, North America and China,” said Adam McCarthy, president of the Cobalt Institute.

Looking ahead, the institute sees cobalt demand reaching 320,000 tons in the next five years, up from 175,000 tons in 2021 as the auto industry produces more battery-powered vehicles.

While supply is expected to pick up this year and into 2023, leading to a more balanced market, the Cobalt Institute says it will begin to slow down from 2024, leading to large shortages. “From 2024-26, supply growth will average 8 percent per year, compared to more than 12 percent for demand,” the report predicted.

The price of cobalt doubled last year, rising from $16 per pound to $32/lb due to strong auto demand and supply disruptions. It is currently trading at $37/lb.

Video: Cars, companies, countries: the race to go electric