trending Market Intelligence /marketintelligence/en/news-insights/trending/awz4zufw5bxnup4stu9yia2 content esgSubNav
In This List

'Cobalt is the new cocaine': Congo proposal jolts battery supply chain

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


'Cobalt is the new cocaine': Congo proposal jolts battery supply chain

SNL Image

Miners dig for cobalt in the Democratic Republic of the Congo. Cobalt is used in most electric vehicle batteries.
Source: Associated Press

The Democratic Republic of the Congo's proposal to slap a "strategic substance" tag on cobalt, while more than quadrupling royalties and imposing a fresh 50% tax on the "super profits" of mining companies, is sending shock waves throughout the supply chain for lithium-ion batteries. If President Joseph Kabila signs the legislation, which the DRC's Parliament passed in January, suppliers fear the potential disruption of supplies of a key ingredient in most batteries powering electric vehicles and electrochemical energy storage systems.

"I think cobalt is the new cocaine," Micheal Austin, vice president of BYD America Corp., said Feb. 2 at Bloomberg New Energy Finance's Future of Mobility Summit in Palo Alto, Calif. "And if you are addicted ... either get off of it or find an alternative that's healthy." Austin predicted "a ripple effect across the world pricing of cobalt."

Driven mainly by surging demand for electric vehicles, the price of cobalt closed Feb. 2 at $80,250 per metric ton on the London Metal Exchange, more than doubling over the past year. Cobalt deposits in the DRC, extracted by artisan miners and major producers such as Glencore Plc, primarily as a byproduct of copper, account for more than half of the world's cobalt production, according to the U.S. Geological Survey. The DRC also accounts for nearly half of the world's cobalt reserves, with over three times more reserves than in Australia, the next largest known source of the metal.

Because of the price spike in cobalt as well as lithium, "most [battery] vendors are not quoting 2019," Austin added. Bloomberg New Energy Finance forecasts that average lithium-ion battery cell prices will rise slightly this year. The research firm expects average battery pack prices will still drop 10% to 15%, however, thanks to energy density improvements, larger battery sizes and manufacturing economies of scale.

One alternative to Congolese cobalt, according to Austin, is cobalt produced in China as a byproduct of nickel extraction. "The other alternative is: break the addiction," he said, pointing to a cobalt-free lithium-ion battery chemistry used by the subsidiary of China-based BYD Co. Ltd. A vertically integrated supplier of batteries, electric vehicles and energy storage systems that also holds equity stakes in mines, BYD relies on batteries both with and without cobalt. "There's not a clear path to reduce cobalt, except if you have an alternative manufacturing platform that can make another chemistry," Austin said.

Larry Reaugh, CEO of American Manganese Inc., sees another option: recycling. The company specializes in recycling spent electric vehicle batteries using lithium, cobalt, manganese and nickel in battery cathodes. "If we're correct and we can get 100% back, we could have a totally closed cradle-to-grave economy, nothing going back to the environment," Reaugh said at the conference in Palo Alto. "That's the answer that every carmaker wants to have eventually."

Reaugh predicted the industry would realize in 2018 that "there's no cobalt out there to supply," driving greater recycling efforts. While existing producers of cobalt in the DRC will continue production as a byproduct of copper, the proposed legislation "slams the door on any future production out of the DRC," the CEO said.

That could force major changes along the lithium-ion battery supply chain. Even without the DRC's proposed new law, Bloomberg New Energy Finance estimates that global cobalt supplies will lag behind demand already by 2021.