The rapid growth in electric vehicles is creating an enormous demand for cobalt, causing high prices and supply chain issues for this critical material.
Cobalt is a ferromagnetic metal and one of the key materials used in lithium-ion batteries for cell phones, notebook PCs, battery-electric cars and hybrids. It is also used in alloys and semiconductors. Although the IC industry consumes a tiny percentage of the world’s cobalt supply, that supply is dwindling.
The big growth market for cobalt is the electric car business, which requires millions of tonnes of cobalt each year. Along the supply chain, metals are mined and processed into cobalt.
Refined cobalt is sold to lithium-ion battery makers, that then sell rechargeable batteries to electric car makers like BMW, Nissan, Tesla, Toyota and others. A smartphone contains 5 to 20 grams of cobalt, compared to 4,000 to 30,000 grams, or 9 to 66 pounds, of cobalt per vehicle, according to Fortune Minerals (a Canadian mining company that deals with the development phase of mines).
Cobalt provides high energy density and thermal stability in a battery. Lithium-ion batteries are made up of an anode, cathode and other components. Graphite is used for the anode. In one example of the cathode, Tesla uses a nickel-cobalt-aluminium-oxide (NCA) chemistry. In simple terms, lithium ions move from the anode to the cathode and back, causing the battery to charge or discharge.
All battery materials have an assortment of supply chain issues, but cobalt is arguably the biggest concern. For some time, cobalt supply has been tight and prices have skyrocketed as a growing number of carmakers are introducing and shipping the next wave of electric vehicles. China, for one, is making a major leap into the arena.
Today, there is just enough cobalt produced to meet demand for electric cars, but it might be a different story in the future. “Generally speaking, there should be enough refined supply to meet demand over the next few years if capacity expansions continue, as expected,” claims Jack Bedder, an analyst at Roskill, a metals/minerals research firm. “After around 2022, we will need to see much more capacity expansion if supply is to meet demand.”
The problem is that around 67% of the world’s cobalt supply is mined in the Democratic Republic of the Congo (DRC), a politically unstable nation with questionable business practices. “Many end-users, namely car companies, will need a lot of cobalt, perhaps thousands of tonnes each year to make their products,” says Bedder. “Cobalt demand is increasing and there are concerns about the availability of future mine supply. There are real child labour issues in the DRC, and thus responsible end users want to procure ethically sourced material.”
Cobalt Supply Issues
Undoubtedly, the automotive industry will require more cobalt to meet future demand, even if the amount of cobalt used in each battery is reduced.
In total, electric vehicles, including battery-electric cars and hybrids, represent around 1% of the world’s cars sold today. However, China and others are driving the market. In fact, the electric vehicle market is projected to grow from 1.2 million units in 2017, to 1.6 million in 2018, to 2 million in 2019, according to Frost & Sullivan.
“Electric vehicles are taking off. Today, we are on track for 100 million passenger vehicles by 2020. That number is growing at around 3%,” says Mike Rosa, director of strategy and technical marketing for Applied Materials. “Of that number, there will be maybe 5 million that will be electric. That’s growing at about 4.6%.”
By 2025, the electric car market is expected to reach 25 million units, according to Frost & Sullivan. Other projections aren’t so optimistic, as Cobalt27 projects 15 million units by the same year.
While original equipment manufacturers (OEMs) face an assortment of technical challenges, for demand planners the problem lies with raw materials. Cobalt itself resides in the Earth’s crust and ocean floor, but it isn’t mined in its pure form. “Cobalt is a by-product of both copper and nickel. Not every copper deposit contains cobalt and not every nickel deposit contains cobalt,” explained Robin Goad, President and Chief Executive of Canada’s Fortune Minerals, that is developing a cobalt-gold-bismuth-copper mining and refinery project in Canada.
Goad clarifies that: “The primary by-product of copper production comes from a unique style of material deposits that are found in the east African copper belt. This goes up from Zambia through the Congo and up into Uganda.”
Nickel deposits are found in Australia, Cuba, Canada and other nations and “Most nickel nickel sulphide and laterite deposits do contain cobalt as a by-product,” he explains.
Generally, copper and nickel mining are capital-intensive businesses. Mining these metals and then refining them into cobalt isn’t a new process, but it’s a complex one with various challenges.
The supply chain is also problematic. DRC is the world’s largest cobalt producer, and the DRC’s government recently increased royalties on mined products, including copper, cobalt and gold, from 2% to 3.5%. According to Roskill, the royalties on cobalt could hit 10%, although some mining companies are exempt from the royalties for the next 10 years.
It’s unclear how this will impact pricing. Generally, cobalt prices have surged in conjunction with booming demand. According to Roskill prices hovered around $13 per pound between 2012 and 2016, only to then skyrocket to $32 per pound last year and rise still further to above $42 per pound in early 2018 (one pound is equal to 0.45kg editor’s note).
The supply/demand picture is also a worrisome issue for battery producers. Today, several DRC-based cobalt mining projects are ramping up or have restarted, so as to meet demand. The two most notable examples are mines operated by Eurasian Resources Group and Katanga Mining. Glencore, the world’s largest cobalt mining company, has a major stake in Katanga.
In 2017, the worldwide supply of refined cobalt production reached 114,700 tonnes, while demand was at 117,700 tonnes, according to Roskill. “The market is broadly in balance,” claims Roskill’s Bedder. “Again, we forecast that there will be sufficient levels of cobalt mine supply until around 2022, but thereafter we will need to see substantial increases.”
Here’s another way of looking at the broader picture: In 2017, electric vehicles consumed about 9% of the world’s production of cobalt, 15.6% of lithium, 1.3% of nickel and less than 1% of manganese, according to the U.S. Department of Energy (DOE). The DOE projects that lithium-ion batteries “will dominate the total cobalt and lithium markets within a few years.”
To meet cobalt demand, the mining industry is developing a number of new projects. In fact, there are roughly 185 cobalt mining projects on the drawing board. However, many projects are still in the development phase, and may not move into production anytime soon.
“These are mines that could theoretically enter production. Most are at very early stages. Lots of projects are taking advantage of the recent hype around cobalt and EVs,” clarifies Roskill’s Bedder. “For now, it’s important to focus on the more developed projects, while keeping an eye on the various early-stage projects to see how they progress.”
Meanwhile, once the metals are mined and processed, cobalt is refined. The materials are shipped to refining companies, many of which are in China. In fact, China controls 60% of the world’s cobalt refinery business.
“You have complex supply chains. These are quite complex issues,” states Michèle Brülhart, director of innovations for the Responsible Business Alliance (RBA), a non-profit group that focuses on the global electronics supply chain.
“The risks that are being reported on or raised in the materials supply chain are concentrated at the very end of the supply chain, mostly what we call the upstream. This is where the materials are extracted, where the first processing takes place, and where they are exported and find their way into the international value chain,” clarifies Brülhart.
The RBA spearheads several programmes, including the Responsible Minerals Initiative (RMI), which addresses issues related to the responsible sourcing of minerals.
To help navigate the supply chain and develop best practices, RMI recently released the Risk Readiness Assessment Platform (RRA), a self-assessment tool that addresses risk management practices across 31 issue areas. It also lists downstream and upstream companies involved in tin, tungsten, tantalum, gold and cobalt. Tantalum, tin, tungsten and gold are considered conflict minerals, which by definition are extracted in conflict zones.
RMI also recently launched the Cobalt Reporting Template (CRT). “This is essentially a mapping tool. It allows companies to identify what we call choke points in the supply chain,” explains Brülhart.
For electric vehicles, the largest lithium-ion battery makers include companies such as BYD, CATL, LG, Panasonic, Samsung, SK and Tesla.
According to Fortune Minerals, there are a total of 41 lithium-ion battery mega-factories in production or under construction worldwide. Each plant requires tonnes of cobalt. For example, CATL is building a new facility that requires up to 23,000 tonnes of cobalt per year.
Generally speaking, there are several types of lithium-ion batteries. For example, batteries that are based on a lithium-cobalt-oxide (LCO) cathode chemistry are used in cellular phones and notebooks. On the other hand, electric vehicle makers use different types of lithium-ion cathode technologies, namely nickel-manganese-cobalt-oxide (NMC) and nickel-cobalt-aluminium-oxide (NCA). Tesla is in the NCA camp, whereas others use NMC.
The first round of NMC batteries contain equal concentrations of nickel, cobalt and manganese, which is referred to as NMC111.
In an NMC111 cell, the cathode material represents 40% of the cost of the battery, according to Benchmark Mineral Intelligence, a consultancy firm. According to Goad, from Fortune Minerals, “There is an initiative to reduce the amount of cobalt contained in the batteries because of cost and supply chain concerns.”
So NMC battery makers are now developing and shipping products with less cobalt. In these batteries, the nickel, cobalt and manganese content come in ratios of either 5:2:3 or 6:2:2. Most call it NMC532 (5 parts nickel, 3 parts manganese and 2 parts cobalt).
Generally, this reduces the cobalt by 20%, but it also increases the nickel content. Nickel helps to boost the energy densities in batteries.
This, in turn, impacts lithium-ion battery costs. “The cost is coming down because of the economies of scale. But more importantly, the batteries are delivering more power with less material. So you are getting more efficient batteries,” says Goad.
The industry is taking this a step further. Now it’s developing batteries with a cathode chemistry ratio of 8:1:1. Due out in 2019, the 8:1:1 batteries reduce the cobalt content and the associated costs. However, the 8:1:1 batteries also face some challenges: as you move to a lower cobalt cell, the volatility increases and the probability of a flammable event is greater.
“The energy density is superior with greater nickel concentrations. But you do so at the expense of safety and there are some charging issues. The performance is impacted with lower cobalt,” Goad said. “You cannot eliminate cobalt below 5% or the structure of the lithium-ion battery breaks down. All of the major battery manufacturers will tell you that cobalt is going to be part of the chemistry of batteries at least for the next decade, if not two decades.” Even with a lower cobalt content in batteries, the market will still require about 240,000 tonnes of cobalt per year by 2025, according to Exane BNP Paribas.
What Comes Next?
Regardless, the battery still remains the stumbling block for electric vehicles. They lack enough range to satisfy many consumers, particularly outside of urban areas.
This is the challenge being addressed by next-generation battery technologies. Some have little or no cobalt content, such as lithium-manganese-nickel-oxide (LMNO). Also in R&D we can find solid-state batteries.
A battery consists of an anode, cathode, electrolytes and a separator. The electrolytes are liquids that transport the ions from the anode to the cathode through a separator. “The separator keeps the anode and cathode from touching each other. If they touch each other, there is a short,” Ionic Materials’ Terjesen explains.
Solid-state batteries replace the liquid electrolyte and separator with a solid material. This technology “will compact the materials in the cell and increase the cell voltage, both leading to an increase in the energy density,” says Imec’s Vereecken. There are several ongoing initiatives in the solid-state battery arena. Ionics, for example, has developed a polymer material that replaces the liquid electrolyte in the battery. A battery maker would still require an anode and cathode, both based on various chemistries. Imec, meanwhile, is developing a solid nanocomposite electrolyte. These technologies are promising, but they are not expected to appear until 2025.
Until then, the industry will continue to use traditional batteries and cobalt will continue to haunt the supply chain, at least for the foreseeable future.
Semiconductor Engeneering, semiengineering.com