By Allison Proffitt
July 12, 2018 | Cobalt and lithium prices have been surging, but some analysts are unimpressed with the battery metal market. Both metals are heading for oversupply analysts said in a recent Bloomberg article. Wood Mackenzie Ltd. forecasts that cobalt supply will exceed demand by 652 tons this year, and 20,842 tons next year. Lithium supply could pass demand by 355,000 tons by 2025 according to Bank of American Merrill Lynch predictions.
Predictions are always a tricky game, especially in the batteries market where technology changes quickly. Several of the analysts Luzi-Ann Javier at Bloomberg spoke with are skeptical that the electric vehicles market will drive battery demand as predicted.
“The speed by which you see adoption of electric vehicles, that’s actually very debatable,” said Darwei Kung, a portfolio manager of DWS Group’s $3.3 billion Deutsche Enhanced Commodity Strategy Fundsaid. “When energy prices are high for traditional vehicles, then the cross-over rate is much higher, much faster. When energy prices are lower, you see that deferred much more.”
But not everyone agrees.
We will need more and more cobalt, even if the cobalt content percentage in the cathode decreases, Christophe Pillot, Battery Survey Manager at Avicenne Energy, told Battery Power. “Today, less than 1% of car market is full EV, [but] it consumes already more than 40% of the Cobalt production,” Pillot said.
While Kung may certainly be right about varying speeds of electric vehicle adoption by consumers, countries around the globe are setting EV goals and benchmarks.
In 2016 several European countries set goals for electric vehicles. Norway aims to only allow sales of 100% electric or plug-in hybrid cars by 2025. The Netherlands plans to ban petrol and diesel car sales by 2025. Both Britain and France plan gas and diesel car bans by 2040. Germany’s Federal Council plans to ban ICEs after 2030.
Car makers seem anxious to get on board. Most recently, Ford announced an end-to-end focus on electrification. But even for automakers who are committed to electric vehicles, any crossover will take time, probably more than forecast. Pillot believes the xEV market will grow fairly slowly: about 20% per year.
Challenges in cobalt supply come less from a wavering market than from pipeline supply, Pillot explains.
Raw materials is by far the most expensive part of the cost of lithium-ion batteries, Pillot said, accounting for 50%-70% of the business. He noted the jump in cobalt prices in 2017, but also noted previous spikes, most recently in 2007.
“Cobalt is a sub-product of nickel and copper,” Pillot explained. “The prices of nickel and copper are low today, so nobody want to invest in new mining project.” There are also geographic challenges. “More than 65% of the cobalt is coming from [the Democratic Republic of Congo] and there is some issue in DRC with the sustainability of the [supply and pipeline],” he said.
Pillot is confident that there is “more than enough” cobalt on the earth. The challenges facing OEMs, he believes, are managing resources, securing supply, and making decisions about where and when to invest in new plants and new mining.
Of course, cobalt and lithium aren’t the only metals impacting the battery space.
Hanre Rossouw, a Cape Town-based portfolio manager at Investec Asset Management, is betting on traditional metals like copper as a way to benefit from the shift in electric vehicles, he told Bloomberg’s Javier. A large-scale switch to electric vehicles will also require significant infrastructure improvements including power grids and charging stations. That will require more copper.