Co supply fears for batteries

C&I Issue 5, 2018

Political, business and Ebola troubles in the Democratic Republic of Congo (DRC) are a worrying development for battery makers and car companies. The DRC produces around two-thirds of all cobalt, while prices of Co already hit ten-year highs in March 2018.

Cobalt is essential in gram quantities in smartphone batteries, while electric cars require kilos.

‘The cobalt price was around $15/pound, until the fourth quarter of 2016 when it started to rocket up,’ says George Heppel, cobalt analyst at CRU. ‘It has now settled at around £43/pound, which is unprecedented.’

He says electric vehicles will boost cobalt demand in future years, but a shortfall for aerospace and other applications lie behind recent rises. Also, investors have begun stockpiling the metal, further choking supply.

Production is expected to rise overall in the DRC. Glencore is the world’s largest supplier of the battery metal and is expected to double production by 2020, especially via its Katanga copper mine where cobalt is a by-product. ‘If all the projects expected to come online in the next five years do come online, we should not see a shortage, but there is a big if there because of the political risks involved,’ Heppel explains.

Glencore is in legal dispute with the DRC state-owned miner. The government is also talking about increasing royalties, rowing back on an agreement not to do so. DRC cobalt production is around 30% cheaper than production in other regions, so companies could absorb royalty increases and still make profits.

‘The quality of ore in the Congo is unprecedented. You won’t find it anywhere else. The ERC is to Congo what Saudi Arabia is to oil,’ says Heppel. ‘Everyone can still make money, but [increasing royalties] is going to stop future investment in the Congo, because people will be more wary about promises made about the mining code.’ There are also elections scheduled for December 2018 to worry about. The mining industry has established a strong relationship with the DRC president, Joseph Kabila, in power since 2011 and any change could be unsettling.

‘The Glencore’s of this world could go back to square one, depending on who comes to power, and it could increase the risk of nationalisation or supply shortages,’ says Heppel.

The recent Ebola outbreak in the DRC has also prompted visions, meanwhile, of a disruptive Ebola epidemic.

While ‘the likelihood of it impacting cobalt mining is very limited,’ says Caspar Rawles, cobalt analyst at Benchmark Mineral Intelligence, ‘…with the ongoing revisions to the mining code and the dispute with Glencore, the DRC continues to be a difficult country to operate and invest in’.

Become an SCI Member to receive events discounts

Join SCI