Cobalt

Cobalt and lithium have big roles in the burgeoning electric-vehicle market, but they’re still subject to price volatility. scharfsinn86/Adobe Stock

This morning in metals news, demand for cobalt and lithium will only grow with the electric car industry, but price ups and downs are likely in the offing, too; London copper took a dip after the U.S. Federal Reserve’s interest rate hike announcement Wednesday; and the U.S. coal industry, in a world with less demand for coal as an energy product, might have to get creative. One writer suggests mining for coal — not for coal itself, but for rare-earth metals contained within it.

Cobalt, lithium markets growing with EVs, but could see fluctuation

One thing is certain: the electric-car industry is growing rapidly.

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According to a Reuters story Thursday by Andy Home, the number of electric cars on roads worldwide doubled last year to 2 million — but only accounted for 0.2% of the global total. However, estimates indicate that number will grow to 3% as soon as 2021 and 14% in 2025.

With that growth comes a need for certain kinds of metals, like cobalt and lithium.

But with a still relatively young electric-vehicle industry, what will demand for these metals look like in the near future?

Cobalt and lithium, for example, are on the “front-line” of the “green transport revolution, Home writes. But that means, to an extent, being subject to the whims of an industry in its early stages.

Large price hikes in lithium late last year and early this year have leveled off. Home added there could be further price volatility, as producers, analysts and traders try to construct consensus demand models.

Copper falls to one-week low

Copper on the London Metal Exchange (LME) dropped to a one-week low Thursday, on the heels of the U.S. Federal Reserve’s decision to hike interest rates for the second time this year, Reuters reported.

Copper fell to $5,462 per ton, according to the report.

Financial uncertainty in the U.S. and a slowing of the Chinese economy will put selling pressure on metals, according to a Kingdom Futures report quoted by Reuters.

Coal industry mining for … rare earths

Global coal production has declined each of the last three years. With a decline in demand, coal-mining operations have to adapt to a world increasingly powered by green energy.

The solution for some might be mining for coal, not for coal’s energy-producing properties, but for the rare-earth metals found within them, according to an article Thursday in Quartz. Per the article, China currently produces 90% of the world’s rare-earth metals.

It’s an interesting idea, even if author Akshat Rathi writes that his three ideas for extraction of rare-earth metals from coal are currently not economically feasible.

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But, as mentioned in yesterday’s This Morning in Metals post, producers have to adapt with the times. Whether we’re talking about copper producers looking for new markets for their copper or coal-mining operations mining for rare-earth metals found within coal, producers have to adjust or risk being left behind.

Ford Motor Company has bet the farm on electric and driverless cars, to borrow a phrase from an article this week.

The appointment of Ford’s new boss, Jim Hackett — who previously headed Ford’s Smart Mobility subsidiary from March 2016 but prior to that, was boss of Steelcase, a business furniture company — illustrates more graphically than words that Ford has read the runes for the internal combustion engine and the current automotive business model, and decided it needs a radical shake-up in its thinking and approach.

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A rethink of where the industry is going over the next 10 years has prompted not just the hiring of this talented outsider, but also, earlier this year, Ford’s $1 billion investment in Argo AI, an artificial intelligence company that, it is hoped, will produce the software needed for a new generation of self-driving cars.

Self-driving cars, though, are dependent not just on developing new technologies but a host of legal, insurance policy and regulatory changes that will take time to evolve.

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Investors are running up cobalt prices as automakers and suppliers stock up on the raw material for lithium-ion batteries as they prepare for an increase in electric vehicle production.

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Reuters reported that Shanghai Chaos Investments and Switzerland-based Pala Investments as two of the companies that invested heavily in cobalt last year, although the amount they’ve stockpiled is unknown.

On Dec. 1, cobalt was just around $30,000 per metric ton on the London Metal Exchange. As of Monday, one mt of cobalt was trading around $49,000. That’s an increase of 63% in three months.

Report: Trump Will Scrap EPA Clean Power Plan Next Week

President Trump is expected to issue orders next week that will begin the process of striking the Clean Power Plan and ending a moratorium on new coal mining on federal lands.

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The plan was largely opposed by manufacturers and metals producers. Its end will most likely bring a sigh of relief from utilities with coal-dominated generation mixes, as well, since they won’t have to alter their generation mixes within any deadlines.

An interesting article in the Financial Times recently reviewed the acquisition by China Molybdenum of the Tenke copper-cobalt mine in the Democratic Republic of Congo from Freeport-McMoRan.

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As the FT points out the purchase at a price of $2.65 billion is the largest single private investment in the DRC’s history and will be the largest purchase of copper assets since China’s purchase of Glencore’s Las Bambas mine in Peru for $6 billion in 2014.

Cobalt Control

The article examines the risks not to the copper market but to the co-product produced at Tenke, cobalt. The article focuses on risks to the cobalt supply chain of China gaining a dominant position in the global chain for this increasingly critical metal. Read more

The British National Health Service has banned the use of metal-on-metal (MOM) hip replacements, after evidence of unacceptably high failure rates. Regulators insist that the NHS stop using any hip replacment implants with a failure rate higher than 5% over five years.

According to the Telegraph, the warning from the National Institute for Health and Care Excellence (Nice) was issued after research uncovered failure rates as high as 43% among some of the implants. MOM resurfacing models made by the likes of DePuy, Smith and Nephew, and Zimmer (including the Adept, Cormet 2000, Durom, Recap Magnum, and Conserve Plus) have been banned, in addition to the Corail/Pinnacle ceramic on metal devices.

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The British Medical Journal has been much absorbed by this topic and has an interesting paper on its website. According to the BMJ, the conventional total hip replacement consists of a metal head with a polyethylene cup. But these joints don’t last forever. Over time the plastic cup wears away against the hard metal head. Younger, more active people are especially likely to require early revision surgery to replace the worn-out joint.

So attention turned to more durable MOM joints that use a combination of cobalt and chromium. And the fear that metal ion would contaminate the bloodstream and damage  surrounding tissues was countered by assertions that more precise engineering around the sphericity, surface finish, and metallurgy would mitigate the risks. Cobalt ions in particular have been shown to be carcinogenic and to cause destruction of tissue and bone around the joint between the head and stem of the implant.

DePuy (a division of Johnson & Johnson) is quoted as saying that in patients with well functioning devices, levels should be no higher than 2 μg/L. However, studies show that blood cobalt concentrations generated through wearing these newer MOM total hip prostheses can reach over 300 μg/L. This is 600 times higher than physiological levels of cobalt (most healthy people have about 0.5 μg/L of cobalt in their blood).

More than 60,000 patients in England and Wales have received metal-on-metal devices since 2003, when the National Joint Registry first began to record procedures. In the US, the figure is closer to a million, and although manufacturers knew of these toxicity issues as far back as 2007, the procedure was still being marketed up to 2012.

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LME volumes base and minor metals

Source: Reuters

Compared to molybdenum and cobalt contracts, as we laid out in Part One, the loser has been the steel billet contract (see graph above) — loser in the sense that while both steel and molybdenum contracts have declined, steel is the largest globally traded metal and as such, demand for a hedging product should be widespread.

For the LME to have lost traction and be slipping so badly suggests the contract is failing to meet the industry’s needs.

Worse for the LME, competitors are on their heels.

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Could we be seeing the beginning of the end of the LME billet contract?

It may be a little early to call time on the oft-maligned steel billet contract — it is by some measures the fourth-most traded product in the ferrous space after the Shanghai rebar contract, SGX iron ore swaps and CME’s iron ore portfolio, according to a Reuters article.

And arguably, as two of those at least are raw materials for which physically traded volumes are almost by definition larger, the LME contract could be said to be doing rather well. The main problem, though, is that volumes are heading in the wrong direction.

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Continued from Part One.

The MOM surfaces are cast and then machined to size and finally polished to a mirror finish to create a perfect fit. The idea is, a perfect fit means the surfaces should never touch each other, according to Dr. Timothy Wright, Kirby Chair of Orthopedic Biomechanics: “Just like the cylinder in an engine block,” he said.

But controversy has also arisen about the way surgeons fit these devices. The femoral head may be polished to a mirror surface, but then the ball surface is hammered into the thigh bone with a mallet, raising the question: how perfect is that fit going to be on assembly of the ball into the socket after such a process?

Nor is the problem confined to full hip replacements. The “replacement light” option of applying a metal coating to the patient’s existing femur and a metal lining to the pelvic socket has suffered similar problems of metallic ion contamination of the blood, suggesting heavy-handed surgery work on the full hip replacements is, at best, only part of the problem.

The use of MOM hip replacement devices has been dramatically reduced with DuPuy’s ASR model, along with others, since being removed from the market in September 2010. The worry for the industry is toxicity caused by MOM joints may cause a backlash against use of metal components and hasten development of ceramic and plastic alternatives. Already new ceramic materials are far less brittle than earlier types, opening up the prospect of extremely close tolerance viable ceramic joints in place of metal on plastic designs.

Joint manufacturers and the medical profession knew of these problems as far back as 2006 and have since done little more than monitor rejections and failures; so one has to say, if the repercussion is a dilution of a metals-dominant role, the medical industry will have done the metals industry a considerable disservice.

The metals industry is rightly proud and producers understandably value the successful application of metal alloys in the medical implants industry. From high-purity refining through forging and casting operations, machining, coating and treating the use of titanium, cobalt, chrome and stainless steels in addition to a number of less common metals, this has been a source of considerable profit for the sector over recent decades.

So the current furor about metal-on-metal (MOM) hip implants has understandably stirred up a lot of debate and not a little media hype into the bargain.

Here in the UK, a recent BBC Newsnight program and British Medical Journal (BMJ) report have thrust the debate into the public domain and a flurry of articles have played up the potential risks — risks that could ultimately lead to a sharp decline in the use of metal alloy implants if subsequent research supports early fears.

The procedure of hip implants has been around since the 1970s, but over time the materials and designs have changed as lessons have been learned. Earlier problems with stainless steel and post-operative dislocations have encouraged a move to cobalt-chrome and titanium alloys for the femoral head (the ball-shaped section with a spike that fits in the femur or thigh bone) and gradually larger femoral heads to counter the tendency to dislocate.

To reduce wear rates found in earlier metal-to-plastic joints, metal-to-metal joints were developed by a number of producers, but notably Johnson & Johnson’s subsidiary DuPuy. As a result, possibly of the larger surface area resulting from larger heads, tests have revealed that minute metal particles worn from the metal-to-metal contact are finding their way into the surrounding tissue and bloodstream.

An article in the Independent says metal ions appear to break off from the implants and leak into the blood, causing local reactions that destroy muscle and bone, cause severe pain and even long-term disability. Studies have shown that the metal particles can seep into the bloodstream, spreading to the lymph nodes, spleen, liver and kidneys before being excreted in urine. There are also concerns about damage to chromosomes, leading to genetic changes that could increase the risk of cancers.

The BMJ report is probably the best source of impartial information on the topic, even giving measured toxicity levels for cobalt and chromium blood tests. The Telegraph recently reported that in the US, experts studied 46 MOM implants retrieved from 44 patients at the Hospital for Special Surgery, in New York, where all implants removed from patients are kept for study.

They found that 98 percent of the cups of the implant and 93 percent of the heads showed moderate to severe scratching. Moderate to severe pitting was found in 43 percent of the cups and 67 percent of the heads; and near the cups and heads, the implants had completely lost their sheen.

Continued later today in Part Two.

MetalMiner gave reader Dominic Daly, who studies at Durham University, a chance to respond to one of our past posts about cobalt, “Conflict Minerals and Their Derivatives: Where Cobalt Fits In. In the spirit of giving the metal’s image (and the DRC) a fair shake, MetalMiner welcomes Daly’s guest commentary.

Cobalt is a strategically important metal in the modern world: it serves several different functions, such as its use as a super-alloy, its use in lithium-ion batteries and also as a catalyst in many important chemical reactions. Cobalt is normally a by-product of nickel or copper mining, and the cobalt is separated from base metals in different locations around the world.

Cobalt has recently come under some scrutiny, as it is mined in the Democratic Republic of Congo (DRC), which is infamous for its conflict mines. These are mines where the minerals extracted from them are sold to buy weapons that feed the conflict in these areas. This is, of course, a genuine industry, which is still being funded by businesses worldwide and is still causing suffering for many people in these areas.

This problem is recognized worldwide and is addressed within the Dodd-Frank Act, which talks about the problem of “conflict materials coming from the DRC and how companies should seek to find alternative supplies of material from areas that aren’t helping to fund the conflict in the DRC. [Ed. note: For a comprehensive run-down on this issue, see Lawrence Heim’s excellent series, published by MetalMiner.]

This is all very well, but a lot of people have been confused as to what materials this act refers to. In the Dodd-Frank Act, “conflict minerals are described as:

(A) columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or

(B) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.

In reading this, it is clear that cobalt is not explicitly mentioned as a “conflict mineral, nor has it been determined by the Secretary of State to be financing conflict in the DRC or an adjoining country and it won’t be for several reasons.

Firstly, the cobalt mined in the DRC is found as a by-product of the copper mining in the copper belt of the country’s southeast Katanga region, on the border with Zambia. This location is more than 1,000 kilometers away from what are considered to be the “conflict mines in the northern Kivu region. The cobalt is not handled, produced or sold for profit by the people who are creating the current conflict in the DRC. Secondly, if authorities find the cobalt in the DRC to be funding any sort of conflict, which is highly unlikely, then copper would have to undergo the exact same classification.

Another thing to consider is how the classification of cobalt as a “conflict mineral would affect the DRC’s people, as it provides them with legitimate work and foreign investment. Further, it would affect the global cobalt industry, as approximately 75 percent of the world’s cobalt is mined in the DRC. Not only would the price of cobalt skyrocket, but it would also create a large drop in the available cobalt to use in the world. This creates problems for many important businesses (such as shortages of super-alloys and lithium ion batteries); those businesses in turn would then have to pay the alternative price of cobalt, which would be astronomical, or switch away from cobalt, leading to inferior products.

In conclusion, Dodd-Frank doesn’t mention cobalt as a “conflict mineral for a reason: it isn’t one and if it ever was, not only would it implicate a lot of other metals, but it would also completely destroy any chance the DRC has of an economy that is beneficial to its citizens.

–Dominic Daly