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Cobalt demand set to roughly double by 2030: Roskill

Highlights

Battery sector to lead demand in coming decade

2020 demand growth rate slowest since 2016

Supply to fall 5% on year in 2020

London — Cobalt demand is expected to roughly double by 2030, largely driven by use in battery applications, according to consultancy Roskill.

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Despite the growing trend toward reducing cobalt use where possible, especially in the automotive sector -- driven by high costs and environmental, social and governance (ESG) concerns -- demand should still be boosted by the growing penetration of electric vehicles (EVs) in the coming decade, as well as demand from the portable electronics industry, Roskill senior cobalt and nickel analyst Ying Lu told a webinar Nov. 30.

Looking at 2020, Lu said that the cobalt market was expected to grow slightly, but at the slowest rate since 2016, to reach around 136,000 mt.

She attributed this largely to demand contractions seen across most of the first-use applications of cobalt, because of the ongoing COVID-19 pandemic, with the sharpest decrease expected in the nickel-based superalloys sector, which mostly consumes cobalt in metal form and includes the aerospace sector as a main consumer.

She noted that aircraft deliveries had fallen by around 20% year on year and that although there is a time lag of a couple of years between purchasing and commissioning of aircraft, cobalt volumes used in these applications would still drop by over 10% and it would take several years for aerospace demand to recover.

Cobalt demand from the battery sector has fared better and Roskill expects to see a 5-10% year-on-year increase in 2020, despite COVID headwinds in the automotive and also portable electronic sectors.

Roskill EV raw material senior analyst Egor Prokhodtsev said EV sales had already rebounded, driven by incentives initiated by governments as COVID-19 crisis support measures to stimulate the transition to a green economy.

"We are expecting sales to increase further as the fourth quarter has historically been the top one and we seriously expect the market in 2020, despite the significant drop in the beginning of the year, to finish it with two-digit growth," he said.

Similarly, sales of smart phones decreased slightly in the first three quarters of 2020, but with the peak season usually being towards the end of the year and the continuing recovery of the macro economy, Roskill expects that Q4 performance could offset the demand loss and bring the full year consumption to something similar to last year's levels.

Prokhodtsev added that, with the rollout of 5G technology and the increase of the number of devices connected to the Internet of Things (IoT), battery demand could be driven by an increasing number of connected devices, rather than increased battery sizes.

"We think the trend that has been on the market for 10 years already will continue and in future we will see increased battery sizes. However, it will be limited to the body size of smart phones, which are expected to reach ergonomical limits and most probably won't be able to increase much further," Prokhodtsev said, noting an Ericsson Mobility forecast that the number of devices connected to the IoT will reach over 5 billion units by 2025.

Supply to fall 5% on year in 2020

Roskill expects global refined cobalt production to fall 5% in 2020 to just over 130,000 mt, which would mark the first decrease in global production since 2016.

However, total refined capacity is expected to grow by more than 10% in 2020, with nearly all the increase coming from China.

The fall in production after three consecutive years of oversupply, was due to due to logistical issues caused by the pandemic, as well as the closure of Glencore's Mutanda mine in the Democratic Republic of Congo (DRC).

"The main change recently is that we see some production cutbacks in the DRC and also outside the country, such as nickel producing companies in Madagascar, Canada etc. and this, coupled with the Mutanda's absence has triggered tightening cobalt feedstock so far this year. Such tightness has been further intensified by logistic disruptions in Africa, caused by the COVID-19 pandemic," Lu said.

This included the closure of Durban port in South Africa, a key transit point for cobalt from the DRC being shipped to China and other refining countries, with most suppliers having to reroute shipments through neighboring countries, such as Mozambique and Tanzania.

This, in turn, had pushed the prices for all the forms of cobalt products higher and brought the cobalt market to a relatively more balanced state.

Roskill expects a decline in both mined and refined cobalt production in 2020, mostly due to falling production in the DRC.

"Over the course of the year, we see several large-scale mining operations in the DRC restarted production or continued to ramp up their output... However, this output combined would not be able to fill up the gap left by the closure of Mutanda, which is by far the largest cobalt mine in the world," Lu said.

Glencore mothballed Mutanda in late 2019 following a slump in cobalt prices and it is expected to remain on care and maintenance until at least 2022, she said.

Cobalt supply from artisanal and small-scale mining operations is also expected to drop, due to low cobalt prices and growing ESG concerns.