Cobalt Use in Rechargeable Batteries Rising as Hybrid-Vehicle Sales Ramp Up

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The average American pays $3.23 per gallon of gasoline, and SUV drivers are dropping upwards of $60 at the pump. The effect of soaring gas prices is felt in almost every aspect of the country's economy. Businesses with fleet vehicles are looking for options other than passing the cost to consumers. For example, Bechtel reduced its transportation costs significantly in one project when it replaced more than 100 of the project's 550 vehicles with gas-electric hybrids. The soaring cost of gasoline is pulling along the demand for eco-friendly, hybrid gasoline-electric vehicles.

The White House says that soaring oil prices are "not going to be solved overnight." At the end of 2005, the U.S. Department of Energy created a tax incentive of about $3,000 for hybrid owners. Hybrid electric vehicles (HEVs) reduce air pollution and fuel consumption by at least 50% compared to conventional vehicles.

One of the main selling points of an HEV is its rechargeable battery, which is either nickel metal hydride or lithium ion. And in the past three years, cobalt use in rechargeable batteries has risen by 284%. The batteries used in HEVs, laptop computers, cell phones, portable tools and other electronic devices all contain cobalt. In addition to these uses, cobalt is used as a super alloy in jet engine turbine blades; a chemical in dyes and pigments; a wear-resistant alloy; a catalyst in gas-to-liquid converters; and high-performance magnets. In the past decade, consumption of this metal has grown at an average annual rate of 12.9%. Globally, batteries represent about 28% of demand, super alloys make up 21%, and catalysts make up 12%.

Most HEVs now use nickel hydride batteries, which contain about 3 to 5 pounds of cobalt, and the use of the more sophisticated lithium-ion battery (containing 5 to 7 pounds of cobalt) is also expected to be common.

The Toyota Prius has become one of the fastest-selling HEVs. With Toyota's success in hybrid sales, along with its projected sale of 1 million HEVs by 2012, it's no wonder that Mercedes, General Motors, Nissan and Honda are attempting to catch up.

The growth in HEV sales is good news for cobalt producers. The $1.3 billion-per-year global industry is a drop in the bucket when compared to gold or copper, but over the past year, cobalt prices have set 30-year price records. The bullish run has reached a height of $54 per pound. Cobalt is largely a copper and nickel mining byproduct with annual production rarely exceeding 65,000 tons per year. The demand for this metal has only risen from about 35,000 tons to 50,000 tons over the past 10 years. However, independent research shows that with the increase in demand for use in HEVs, chemicals and other applications, combined with the growth of emerging markets like China and India, the demand for cobalt will increase to 105,000 tons per year by 2013. China has increased its refined-cobalt consumption to one-fifth of global production last year, a 3% increase from a decade ago. Much of its production is from imported cobalt-rich ores from the Democratic Republic of Congo (DRC). China anticipates that a high percentage of the cars sold domestically by 2030 will be HEVs.

As the demand for cobalt continues to grow, its producers are poised to meet demand. Industrial Info is tracking the activities of cobalt projects worldwide, and our research shows that the DRC will continue to be a major worldwide cobalt producer for the next five years. Several projects will produce enough cobalt to power the numerous hybrids anticipated on the roads worldwide. The projects include: the Tenke Fungurume (DRC), Katanga (DRC), KOV (DRC), Talvivaara Mulyashi (Zambia), Goro (New Caledonia) and Nkamouna (Cameroon).

View Project Report - 83200004 85400001 79900061 85500037 85400024

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process and energy related industries with products and services ranging from industry news, forecasting, plant and project databases, as well as multimedia advertising campaign assistance.