American Resources Policy Network
Promoting the development of American mineral resources.

Is Cobalt on Your Radar Yet?

Last week, we highlighted what has been one of the bright spots in the metals and minerals sphere in recent months – Lithium.  Potentially one of the most important critical materials of our time because of its application in battery technology, its rise to stardom has cast a shadow on another material that may be equally critical: Cobalt.  As John Petersen writes for Investor Intel:

“For the last 10 years we’ve been deluged with news stories and investment analyses that extoll the virtues of lithium-ion batteries and speculate on the technology’s potential to change the world’s energy landscape forever. While the occasional curmudgeon like my colleague Jack Lifton questions the availability of enough lithium or flake graphite to satisfy soaring demand from the battery industry, everybody has overlooked or ignored the most critical mineral constraint – Cobalt.”

While this is certainly true for the mainstream, readers of our blog may be familiar with Cobalt’s critical mineral status.

In 2011, it was one of only four minerals to appear on all three then-published lists of critical metals: the U.S. Department of Energy’s Critical Materials Strategy list, the American Physical Society’s Panel on Public Affairs & Materials Research Society’s list of Energy Critical Elements, and the European Commission’s Critical Raw Materials list.

We pointed out at the time that with its applications in industrial and various critical defense applications, and in light of the fact that more than 50% of the world’s Cobalt is mined in the Democratic Republic of the Congo (DRC) – hardly a reliable trading partner – it came as no surprise when Cobalt also took a top tier spot in the American Resources Risk Pyramid, a risk screen for metals and minerals used in U.S. defense applications we created in 2012.

According to USGS data, the U.S. is home to significant Cobalt deposits, but our import dependency currently stands at 75 percent.

But as Robin Bromby points out, the supply situation has deteriorated with the fall in copper and nickel prices, the metals that are mined with cobalt as a by-product. He explains:

“According to Formation Metals, demand growth for cobalt is running at 5.4% a year but supply growth is running at just 2.4%. Cobalt is expected to go into deficit this year; Formation expects mine closures and other factors to mean global output will decline 11% this year. (The biggest threat may be that the nickel prices stay depressed, which will put pressure on nickel laterite mines around the world, and therefore further reduce cobalt by-product.)”

And, as John Petersen puts it bluntly, this will have consequences for the Lithium-Ion battery industry:

“In my view the battery industry is careening toward a natural resource cliff at 120 mph while fiddling with the touch-screen and tweeting about its unlimited potential. The supply side of the cobalt equation is entirely dependent on global demand for nickel and copper. The demand side of the cobalt equation includes a rich variety of manufacturers that must have cobalt for products the world considers essential. 

Whenever increasing demand crosses swords with inflexible supply, the inevitable outcomes are chronic shortages and substantially higher mineral prices.”

So if Cobalt isn’t on your critical (tech) minerals list yet, the time to put it on your radar is now.