Fortune Minerals : Cobalt News

The Economist - August 14, 2022

Electric vehicles (evs) seem unstoppable. Carmakers are outpledging themselves in terms of production goals. Industry analysts are ...

Electric vehicles (evs) seem unstoppable. Carmakers are outpledging themselves in terms of production goals. Industry analysts are struggling to keep up. Battery-powered cars could zoom from less than 10% of global vehicle sales in 2021 to 40% by 2030, according to Bloombergnef. Depending on whom you ask, that could translate to anywhere between 25m and 40m evs. They, and the tens of millions manufactured between now and then, will need plenty of batteries. Bernstein reckons that demand from evs will grow nine-fold by 2030 (see chart 1), to 3,200 gigawatt-hours (gwh). Rystad puts it at 4,000gwh…It is, though, looking increasingly as though the activity is not quite frenzied enough, especially for the Western car companies that are desperate to reduce their dependence on China's world-leading battery industry amid geopolitical tensions. Prices of battery metals have spiked (see chart 2) and are expected to push battery costs up in 2022 for the first time in more than a decade…Most troubling for Western carmakers is China's dominance of battery-making. The country houses close to 80% of the world's current cell-manufacturing capacity. Benchmark Minerals forecasts that China's share will decline in the next decade or so, but only a bit-to just under 70%. By then America would be home to just 12% of global capacity, with Europe accounting for most of the rest…These manufacturing bottlenecks, serious though they are, look more manageable than those at the mining end of the battery value chain…Cobalt has become less of a pinch point. A price spike in 2018 prompted battery-makers to develop battery chemistries that use much less of it. Planned mine expansions in the Democratic Republic of Congo (drc), home to the world's richest cobalt deposits, and Indonesia should also tide battery-makers over until 2027. After that things get trickier. Getting more of the stuff may require manufacturers to embrace the drc's artisanal mining, the formalisation of which has yet to bear fruit. Until it does, many Western carmakers say they would not touch the sector, where adults and many children toil in harsh conditions, with a barge pole…Because building mines takes anywhere from five to 25 years, there is little time left to get new ones up and running this decade. Big mining firms are reluctant to get into the business. Markets for green metals remain too small for mining "majors" to be worth the hassle, says the development boss at one such firm. Despite their reputation for doing business in shady places, most lack the stomach to take a gamble on countries as tricky as the drc, where it is hard to enforce contracts. Smaller miners that usually get risky projects off the ground cannot raise capital on listed markets, where investors are queasy about the mining industry, which is considered risky and, ironically, environmentally unfriendly…The resulting dearth of capital is attracting private-equity firms-often founded by former mining executives-and manufacturers with a newfound taste for vertical integration. lg and catl are among the battery producers which have backed mining projects. Since the start of 2021 carmakers have made around 20 investments in battery-grade nickel, and five others in lithium and cobalt. Most of these projects involved Western firms. In March, for example, Volkswagen announced a joint venture with two Chinese miners to secure nickel and cobalt for its ev factories in China. Last month General Motors said it would pay Livent, a lithium producer, $200m upfront to secure lumps of the white metal. The American ev champion, Tesla, is signing deals left and right…Even if the West's ev industry somehow managed to secure enough metals and battery-making capacity, it would still face a giant problem in the middle of the supply chain, refining, where China enjoys near-monopolies (see chart 3). Chinese companies refine nearly 70% of the world's lithium, 84% of its nickel and 85% of its cobalt…Western governments say they understand the urgent need to diversify their suppliers…And it remains possible that enough discoveries of new deposits, more efficient mining technology, improved battery chemistry and sacrifices on performance all combine to bring the market into balance. More likely, as Jean-François Lambert, a commodities consultant, puts it, the ev industry is "going to be living a big lie for quite some time".