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Market prices for cobalt metal have hit a close to four-year high and crossed the $40 per lb resistance point in earlier pricing sessions. Some market sources have therefore questioned whether the ongoing rally will eventually dent consumption from the downstream battery sector, even potentially slowing electric vehicle (EV) adoption.
Fastmarkets assessed the standard-grade cobalt price, in-warehouse Rotterdam at $39.50-40.05 per lb on Tuesday April 19, up by by 17% from $33.50-34.05 per lb at the beginning of the year.
Fastmarkets assessed the price of cobalt alloy grade, in-whs Rotterdam at a slight premium at $39.50-40.25 per lb on the same day, also up by double-digit percentage points since January.
It is the first time since March 2018 that prices have reached $40.00 per lb, and only the third time since the price series began in 1992.
But participants at the MMTA conference in Sheffield told Fastmarkets that the underlying drivers of demand and the expected consumption growth trend for cobalt in EV batteries will sustain demand, even in a high-price scenario.
“The demand growth from the battery sector is creating a deficit in the cobalt supply/demand [balance] that will increase from this year to the next, probably through 2030,” a cobalt supplier said. “The degree of the shift from [ICEs] to EVs is such that higher cobalt metal prices won’t stop it. They may slow it down somewhat, but not significantly.”
The source added that current battery cathode technologies in use among auto manufacturers maintain a cobalt component (such as NCM and NCA technologies), and this is likely to remain the case going forward.
Cobalt is used in battery cathodes for its thermal stabilizing attributes, to prevent overheating and fires; as such, it is a key component ensuring the stability and safety of the batteries.
A growing share of global output is being taken up by the battery sector, and growth projections have prompted concern from non-battery and industrial cobalt users about their future security of supply.
“Customers have been fretting about that with us, asking if in a few years’ time we won’t be supplying them anymore because we’re selling everything into battery manufacturing,” a cobalt producer source said. “That won’t be the case, because we plan to continue to serve all of our historic customers. But it shows the worry [from the industry] is there.”
The rally in battery raw material prices that kicked off in 2021, following the multi-year commodity price lows of 2020 at the height of the Covid-19 pandemic, has also affected other key metals including lithium, copper, nickel and graphite.
Lithium prices have increased over five-fold since 2021.
Fastmarkets assessed the price of lithium carbonate 99.5% Li2CO3 min, battery grade, spot price cif China, Japan & Korea at $75-80 per kg on Tuesday April 12, compared with $11-12 per kg a year ago.
“There was a brief moment in February where the cost of [lithium iron phosphate] LFP battery chemistry was higher than that of NCM, just down to the lithium cost increase,” a cobalt trader said, adding that cobalt content in batteries is still lower in volume terms than nickel, lithium or graphite.
“They’re trying to engineer cobalt down, so you may have a smaller share of it per battery cell, but it’ll still be in it. And the higher expected demand across the board for EV batteries would compensate the lower amount per cell. So for the sell side it’s not a concern,” a second trader said.
Other factors that should drive demand include this year’s sharp rise in petrol and diesel prices across western economies. The oil crisis is deepening with the escalation of the war in Ukraine and trade sanctions affecting Russian relations with the west. This in turn affects inflation.
“One only needs to look at oil prices to see why EV demand is going to pick up. It used to cost me $50 in December to fill up by car, now it’s $75,” a third trader said.
Cobalt producer and trader Glencore’s multi-year cobalt supply agreement with General Motors, announced early last week, signaled further support for cobalt demand dynamics, sources said.
“The Glencore-GM deal is a clear signal that the downstream automakers’ industry is factoring in cobalt in their strategy, not just now, but for many years to come,” a fourth trader said.