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Cobalt, an important battery material, is suddenly in surplus

Jayjust one year Previously, a global tightening of one metal looked likely to single-handedly derail the energy transition. Not only is cobalt, a vital battery material, being mined too slowly to meet soaring demand, but the vast majority of known reserves are in Congo, a country rife with unrest, corruption and child labor. Fast-forward to today, and prices for the blue metal, which more than doubled between summer 2021 and spring 2022 to $82,000 a tonne, have now fallen to $35,000, not far from record lows.

This story is partly one of the reasons for the reduced demand. Most cobalt goes into the battery packs that power smartphones, tablets and laptops. Demand for these products, already strong in the 2010s, exploded during the covid-19 pandemic. It has weakened as people spend less time staring at screens: As demand for consumer electronics has fallen, so has demand for cobalt. Even the electric car boom isn’t enough to offset that, as manufacturers do their best to reduce the use of previously super-expensive metals.

Meanwhile, supply is rising, and fast. Susan Zou of consultancy Rystad Energy forecasts that Congo’s output will rise 38% this year to 180,000 tonnes. Most notable is the surge in exports from Indonesia, which are expected to reach 18,000 tonnes this year, up from almost nothing a few years ago. The world may find itself swimming in cobalt.

In other markets, low prices will force producers to close mines. Not suitable for cobalt. The price has dropped below the break-even point for many miners. However, Glencore, the world’s largest, said on Feb. 15 that it would likely increase production in 2022, leaving production virtually unchanged this year; 16% of global production in 2022). Big companies can tolerate low prices because cobalt is a by-product of copper and nickel extraction, which remain expensive. Electric carmakers around the world are turning to Indonesia for nickel, launching projects that will also produce cobalt. China Moly’s giant mine in Congo will produce three times as much copper as the blue metal.

Prices are still likely to rise slightly this year as speculators look for bargain-hunting. After 2025, however, another damper emerges. At that point, the first EV batteries, which typically last eight years, will begin to be recycled, reducing the need for new supply. No matter how fast the energy conversion is, the blue gold is unlikely to act as a brake.

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