There are no short-term alternatives to using cobalt in electric vehicle batteries today, writes financial energy specialist Gerard Reid. Even if the cobalt price continues to go up, it will be a long while before production is able to match growing demand, Reid argues.
Two years ago, I identified the significance of cobalt for the future of the electric vehicle. My investments have paid off well. But, sadly, many of the automobile manufacturers such as VW did not understand the significance of cobalt and their inability to secure the material now puts their whole electrification strategy in danger.
This issue is significant as there are no short-term alternatives to using cobalt in electric vehicle batteries. Even if the cobalt price continues to go up, it will be a long while before production is able to match growing demand.
Cobalt is rarely found as a native metal; it occurs as a by-product of metals such as nickel, copper and lead
The good news is that there is a lot of recoverable cobalt out there. According to the American Geological Survey, there are 7m tonnes of cobalt reserves in the ground which is enough for 70 years of consumption at current demand levels. The bad news is that cobalt is rarely found as a native metal; it occurs as a by-product of metals such as nickel, copper and lead.
The result is that the vast majority of cobalt supply depends on the demand for these other metals; the price of cobalt does not determine the economic viability of such projects. This may change going forward as a rising cobalt price would mean for many nickel mines that cobalt could be seen as a co-product rather than a by-product.
No real alternatives
What makes cobalt so valuable is its high melting point (1,494 degrees centigrade) which makes it a perfect material for making superalloy metals for use in everything from turbine blades to prosthetics. This unique quality makes cobalt the perfect addition to lithium-ion batteries to stabilize the battery and prevent fires and explosions, while at the same time conserving battery strength and extending battery life.
There are of course alternatives to lithium-ion batteries such as lead-acid or nickel-metal hydride, but these chemistries have poor energy densities (thus low range) which means they are not suitable for electric vehicles.
Cobalt is presently the most important material, from strategic and cost viewpoints to further develop the lithium-ion battery
There are alternative lithium-ion chemistries such as lithium manganese oxide (LMO) or lithium iron phosphate (LFP), which are suitable for applications like power tools and electric buses. However, both these alternatives are not energy dense enough to be used in automobiles or mobile phones, which brings us back to needing cobalt.
There is a trend to minimise the use of cobalt by moving from the commonly used NMC111 to NMC 532 and eventually to NMC811, which basically means using more nickel (n) and manganese (m) and less cobalt (c) in the cathode. But automobile manufacturers will be reluctant to reduce cobalt content until they are sure that safety will not be compromised.
The other possibility is to replace cobalt altogether with other materials, but we are at least five years away from being able to do this.
The bottom line is that cobalt is presently the most important material, from strategic and cost viewpoints to further develop the lithium-ion battery. If an automobile manufacturer or a battery supplier wants to ramp up production, they HAVE to secure future supplies of cobalt. A simple example will suffice to explain the issue. The new electric Nissan Leaf uses a 40kWh battery which costs in the range of $8,000 to produce.
That, of course, assumes that Nissan or their supplier are not paying the current market price for cobalt, which stands at nearly $100 a kg, up from $10 per kg two years ago. Given that each car uses circa 8kg of cobalt that material is costing some $800 which is circa 10% of the cost of the battery pack.
As the cobalt price goes up, alternative sources of cobalt will become available
The big question now is will the cobalt price go higher in the short term. The answer is probably yes. Each additional million EVs requires an extra 8,000 tonnes of cobalt. Although more cobalt is in the pipeline to increase supply, it is hard to see supply keeping up with demand over the next five years; especially given that half the world’s reserves and present supply come from the politically unstable Democratic Republic of Congo.
As the cobalt price goes up, alternative sources of cobalt will become available. But the issue is that by the time much of this supply comes online technological advances may mean that we no longer need all that cobalt!
Gerard Reid is founding partner of Alexa Capital in London, a leading corporate finance business focused on energy and mobility. He has over two decades of experience in equity research and fund management in the energy area.
This article was first published on Energy and Carbon, a blog hosted by Reid and energy journalist and advisor Gerard Wynn. It is republished here with permission.