Cobalt is a key ingredient in lithium-ion batteries that power electric vehicles (EVs), but its price has been falling sharply due to oversupply and slowing demand.
However, Chinese-owned companies are not deterred by the market slump. They are aggressively expanding their cobalt mining operations in Congo and Indonesia, the world’s top two producers of the metal, in a bid to raise their market share and secure supply for China’s booming EV industry.
China’s Cobalt Dominance
China is the world’s largest consumer and importer of cobalt, accounting for more than 80% of global refined cobalt demand in 2022, according to Morgan Stanley.
China’s CMOC Group, which increased its cobalt output by 144% during the first three quarters of 2023, is now on track to become the world’s biggest cobalt producer, overtaking commodity giant Glencore.
According to a report by Reuters, CMOC’s Kisanfu mine in Congo is partially owned by China’s CATL, the world’s largest battery maker for EVs.
Analysts say CMOC is able to operate at low costs, likely helped by receiving cheap financing from the Chinese government, which sees the cobalt sector as vital to China’s EV industry.
“Is CMOC trying to flood the cobalt market in an attempt to control a larger share of the market and oust the marginal producers, giving them more control over prices in the medium to long term? That is a possibility,” said Jorge Uzcategui, an analyst at consultancy Benchmark Mineral Intelligence.
CMOC said that the growth of cobalt supply has to some extent dispelled downstream concerns about its sustainability.
“Our cobalt products are mainly sold through long-term contracts and are not subjected to short-term market fluctuation,” a CMOC spokesperson told Reuters.
Other Chinese firms, such as MMG Group and Jinchuan Group International Resources, are also expanding their cobalt output in Congo.
Cobalt Alternatives
Cobalt was once seen as an indispensable element of EV batteries, with prices soaring in May 2022 to four-year highs.
But EV sales have been slowing as inflation hits consumers and governments cut subsidies, while batteries without the mineral have been rising in popularity.
A combination of high prices and ethical concerns about child miners and unsafe conditions in Congo have prompted some battery companies to look for alternatives.
“Lithium is pretty fundamental to a lithium-ion battery… but with cobalt, you can design it out,” said Alex Holland at consultancy IDTechEx.
Increasing nickel and cutting cobalt increases energy density, allowing longer driving ranges in EVs, he added.
While lower cobalt prices may revive use of higher-cobalt batteries, content of the metal in popular nickel manganese cobalt (NMC) batteries has been declining, while lithium iron phosphate (LFP) batteries contain none at all.
Indonesia’s Cobalt Boom
Global refined cobalt supply is expected to climb 23% this year, creating a surplus of 74,800 metric tons by 2024, according to Morgan Stanley.
Congo, the No. 1 producer, has kept miners under pressure to ramp up output to maintain the millions of dollars it receives each year in mining royalty and tax payments, analysts said – particularly with an election upcoming this month.
Analysts had expected at least some major cobalt producers to impose cutbacks, as happened recently in nickel to curb excess supply, but only scant action has materialised.
However, delays and cuts have been more than offset by new projects, especially in Indonesia, which last year became the world’s second biggest producer, with many owned by Chinese companies.
“Our view is that Indonesia is a game changer for cobalt,” said Bedder at Project Blue.
Indonesia is expected to roughly quadruple its production of cobalt in mixed hydroxide precipitate (MHP) by 2033 and may expand even further if all projects go ahead, Project Blue forecasts.
“In the next five years or so, we think they’ll be oversupplied in the market. So essentially that’s going to mean prices are going to remain low for the foreseeable future,” said Thomas Matthews at CRU.
Despite the challenges, cobalt remains a crucial component of many EV batteries and a strategic resource for the transition to a low-carbon economy. As the demand for EVs grows, so will the need for sustainable and ethical cobalt production.
