The Good, the Bad, and the Ugly of Cobalt

The cobalt price index fell below $26,000 per tonne as of April 2023, its lowest level since 2019. Indeed, while cobalt demand remains largely steady, there has been a significant increase in supply. Meanwhile, analysts expect the demand for refined cobalt, frequently used in rechargeable batteries, to increase by 8% to 205,000 tonnes by 2023. However, they also anticipate supply to increase by 24% to roughly 210,000 tonnes.

Forecasts predict the Democratic Republic of the Congo will deliver 180,000 tonnes of cobalt this year. Not only would this impact the cobalt price index, but it represents an increase of more than 30% from 2022. Moreover, that figure could balloon to roughly 225,000 tonnes by 2024, a fact contributing to the sharp decline in cobalt prices. Though many agree demand will increase, concerns regarding this cobalt oversupply produce increased pricing pressure for this year and the next.

Cobalt is a crucial component of electric vehicle batteries. Therefore, the decline in cobalt costs is good news for companies that make EVs. The batteries for electric vehicles will be less expensive due to the decreased pricing, which could make them more accessible to consumers.

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Controversies With Cobalt

Lithium-ion battery cathode, which stores and discharges energy, uses cobalt, hence the metal’s necessity. Cobalt use is heaviest in the portable consumer electronics sector at the moment. However, EV batteries are predicted to grow in demand and use over the next ten years. This could have an impact on the cobalt price index in the long-term. Despite its clear value, sourcing and mining cobalt have detrimental effects. This is mainly because mining cobalt typically occurs in situations with subpar labor standards and poor human rights guidelines. Because of this, cobalt is somewhat risky to obtain.

For example, in the cobalt mining industry, child labor has historically been a major problem. There is also the fact that the mining process itself can have serious negative effects on the environment if not done correctly.

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Benefits of Cobalt Use

Cobalt remains essential to the production of electric vehicles despite these drawbacks, as it significantly improves battery performance and range. Researchers continue to investigate other battery metals nickel, manganese, and iron as potential cobalt substitutes. These metals are more widely available and less expensive than cobalt and are also commonly used in batteries. Despite this, they may not function as well in EV batteries due to their lower energy density.

As more nations and businesses commit to lowering their carbon emissions, many experts predict the demand for cobalt in EV batteries will rise in the next decade. Due to disturbances in the supply chain, the cobalt price index experienced fluctuations over the past few years. However, due to projected overwhelming demand in the long term, most anticipate that the price will rise, despite their current bearish placement.

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How Demand Over the Next 5 Years Could Impact the Cobalt Price Index

Current figures predict a rise in cobalt demand over the next five years. Meanwhile, initiatives like switching to lower cobalt battery chemistries will help slow the growth-driven displacement of cobalt. Nevertheless, the limited supply of cobalt and rising demand for electric vehicles and battery storage should drive the cobalt price even higher.