Availability and Price of Cobalt and Lithium Unlikely to Pose Problems for Electric Vehicle Deployments

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Sharply rising demand for electric vehicles has, over the last two years, pushed up demand and prices for cobalt and lithium, critical elements of electric vehicle (EV) batteries. Predictions about strong future growth of EVs have caused some to worry whether the future supply and price of these two minerals could become a limiting factor in future EV deployments. Recent research from BP plc (NYSE:BP) (London, England) and McKinsey & Company (New York, New York) suggest these concerns are overblown.

Industrial Info is tracking numerous cobalt and lithium mining or processing projects scheduled to begin construction over the next two years, though some proposed projects have been delayed for years or in some cases a decade or more. Collectively, the research suggests that lithium and cobalt should be available in sufficient quantities to keep prices affordable for the next few years at least.

In releasing its annual statistical summary of world energy on June 13, BP Group Chief Economist Spencer Dale said he is often asked "whether the available supplies of raw materials (mainly lithium and cobalt) used to produce batteries for electric cars could act as a constraint on the speed with which they grow."

Dale said there was no easy answer, but that "the short answer is that if either metal is likely to pose a bottleneck, it appears most likely to be cobalt." The majority of cobalt reserves and production are concentrated in the Democratic Republic of Congo, and that country's history of civil strife poses significant risks to companies operating inside the country as well as battery manufacturers dependent on cobalt mined there.

Click on the image at right to see a snapshot of reserves and production of lithium and cobalt. Because most cobalt is produced as a by-product of nickel or copper mining, the BP economist said production of cobalt is, to a large degree, a function of demand for and price of those other minerals. However, "the new wave of battery technologies now being developed requires less cobalt. So rather than act as a constraint on the growth of electric vehicles, the availability of cobalt could simply provide further momentum to this technological change," suggesting substitute minerals or advances in battery chemistry could lessen future demand for cobalt.

Lithium, by contrast, is more straightforward. Its reserves and production are more spread out geographically: Reserves and production are concentrated in Chile, Australia and Argentina. Thus, there is less country risk associated with mining or processing that mineral. Plus, developers have announced numerous greenfield and expansion plans for lithium mines. Dale feels existing production plus announced projects "look sufficient to ensure ample supplies for the next 10 or 15 years."

About 40% of lithium produced in 2017 went into consumer electronics, mainly batteries, noted "Lithium and Cobalt--a Tale of Two Commodities," a report released last month by McKinsey & Company. It added about 25% of cobalt produced last year also found its way into consumer electronics--again, mainly batteries.

The consulting firm predicted demand for lithium would more than double between 2017 and 2025. Demand for cobalt, on the other hand, was expected to rise 60% during that same time.

"The recent price spikes for lithium and cobalt have resulted in many battery manufacturers working to reduce the overall material needed ... and additionally focus on less cobalt-intensive chemistries," the report continued. It added that overall, battery prices are more sensitive to changes in the price of cobalt than they are to changes in the price of lithium. Accordingly, battery manufacturers are focused on developing high-performance, low-cobalt, high-nickel batteries.

Industrial Info is tracking 127 active cobalt projects around the world with total investment value (TIV) of about $16.2 billion. Of that total, approximately 79 projects valued at about $10.4 billion are scheduled to begin construction in the next 24 months. China, the U.S., India, Canada and Australia are the countries with the largest dollar value of cobalt projects under development. Some of these projects have been delayed for years.

Regarding lithium mines and processing facilities, Industrial Info is tracking 252 active projects with TIV of about $26.8 billion. Of that, 135 projects valued at approximately $16 billion, are slated to begin turning dirt over the next two years. The countries with the largest value of lithium projects under development are Argentina, China, Canada, South Korea and Australia. As with cobalt projects, many lithium projects have been delayed for years.

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