Cobalt market, net-zero targets face 'urgent need' for new mine spending

The mining industry needs to spend at least $1.7 billion on new cobalt mines, beyond what is already planned or being built, or risk slowing down the energy transition, according to BloombergNEF's Cobalt 2050 report released Oct. 8.

Cobalt is a key battery metal and demand for the commodity is set to climb over the coming decades, analysts say. While battery chemistries containing less or no cobalt have been gaining market share, absolute demand for the increasingly less popular cobalt-containing batteries will still grow, BloombergNEF projected in the report.

Climbing demand means more supply than planned is needed and soon, said Kwasi Ampofo, BloombergNEF head of metals and mining who spearheaded the study for the Cobalt Institute, an industry group that advocates for the sector.

"Given the time it takes to make new discoveries, build new mines and expand existing ones, [delaying spending] beyond the end of this decade will tighten the [net-zero] timelines," Ampofo told S&P Global Commodity Insights Oct. 8 after a live-streamed presentation about the report.

Big build

In the presentation, Ampofo cast the $1.7 billion estimate as conservative, noting that it did not include spending on infrastructure, or any announced or in-progress cobalt projects.

In order to meet net zero targets, BloombergNEF projected that the industry will need 30 new mines of average size to come onstream between 2024 and 2050. Cobalt is often extracted as a byproduct at base metal mines.

"There is, therefore, an urgent need to deploy the needed capital today to prevent deficits in future," BloombergNEF analysts said in the study.

During the Oct. 8 webcast, Ampofo said "the danger is that we slow down the energy transition" without adequate cobalt supply.

The battery sector, driven by the energy transition and growing adoption of electric vehicles, will be the main demand driver, BloombergNEF said.

Still growing

Global cobalt demand from batteries is set to grow from about 150,000 metric tons per year in 2025 to about 250,000 metric tons per year in 2050 and batteries will account for 60% of the cobalt market in 2050, according to the report.

To be sure, the market share of non-cobalt containing batteries such as lithium-iron-phosphate and lithium-manganese-iron-phosphate are on track to dominate the EV sector. But cobalt-containing batteries, which are known for higher energy densities, will still hold onto a significant share of the market, BloombergNEF projected.

Lithium-iron-phosphate and lithium-manganese-iron-phosphate batteries will account for 62% of the market by 2035, up from about 41% in 2023, while the market share of popular nickel-manganese-cobalt chemistries will shrink, according to the study. But the sheer volume of demand growth for products such as EVs means demand for cobalt is expected to rise.

Other analysts also project cobalt demand growth in the longer term, though the cobalt market appears to be well supplied in the medium term.

"Whilst the market, transport in particular, has and will continue to shift toward lower and zero-cobalt chemistries, nickel-based chemistries that consume cobalt still remain an important part of the market," Caspar Rawles, chief data officer at Benchmark Mineral Intelligence, said in an email.

London Metal Exchange spot cobalt prices surged to over $80,000 per metric ton in 2022, amid bullishness over the metal's prospects in the battery sector. But quick demand growth of low and no-cobalt chemistries helped pull prices down under $30,000 per metric ton by 2024, where prices have remained.

"We anticipate the cobalt market to be in surplus through our forecast period to 2028," Commodity Insights analysts said in Sept. 26 report.

Still, since it takes years to develop new mines, Ampofo and others underscored the need to plan around potential deficits or risk slowing down progress in meeting net-zero goals.

"We need to accelerate a whole lot of things," Jörgen Sandström, head of the Industrial Transformation Program at the World Economic Forum, said during the Oct. 8 presentation.