Jonly a year Before, it looked like a global metal meltdown would single-handedly derail the energy transition. Not only was cobalt, a key battery material, mined far too slowly to meet rising demand, but the lion’s share of known reserves were located in Congo, a country fraught with instability, corruption and child labor. Fast forward to today, and the price of the blue metal, which more than doubled between summer 2021 and spring 2022 to $82,000 a tonne, has collapsed to $35,000, not far from historic lows.
The story is partly one of reduced demand. Most of the cobalt goes into the battery packs that power smartphones, tablets, and laptops. The appetite for it, already strong in the 2010s, exploded during the Covid-19 pandemic. Since then it has waned as people spend less time staring at their screens: as demand for consumer electronics fell, so did demand for cobalt. Even a boom in electric vehicles hasn’t been enough to counteract this, as manufacturers have done their best to reduce use of the once super-expensive metal.
At the same time, supply is increasing, and fast. Susan Zou of Rystad Energy, a consultancy, predicts that Congo’s production will rise 38% to 180,000 tons this year. Most notable is an increase in Indonesian exports, which are expected to reach 18,000 tons this year, from virtually zero a few years ago. The world could swim in cobalt.
In other markets, low prices would force producers to close mines. Not for cobalt. The price has already fallen below the breakeven point for many miners. But Glencore, the world’s largest company, said on February 15 it could keep production almost flat this year after ramping up in 2022; China Moly, a competitor, is about to open a new facility that could produce 30,000 tons per year (equivalent to 16% of global production in 2022). Big companies can tolerate low prices because cobalt is a by-product of the extraction of copper and nickel, both of which remain expensive. EV makers around the world are vying for nickel and launching projects that will also supply cobalt. China Moly’s monster mine in Congo will produce three times as much copper as the blue metal.
Prices could still rise a bit this year as speculators try to snap up bargains. Beyond 2025, however, another setback is on the horizon. At that point, the first wave of electric vehicle batteries, which typically last up to eight years, will begin recycling, reducing the need for new batteries. No matter how fast the energy transition accelerates, the blue gold should not be a brake.■
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