CHART: Price spike doubles value of cobalt EV battery market
As the electric vehicle (EV) sector continues to evolve, the dynamics surrounding cobalt prices and supply chains are steadily changing. For analysts and industry insiders, understanding these fluctuations is critical not just for forecasting pricing trends but also for grasping the wide-ranging implications for battery manufacturing and material sourcing. This article provides a current perspective on the cobalt market, elucidating its supply challenges, price volatility, and the shifting landscape as alternative battery technologies gain momentum.
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### Cobalt Market Fluctuations: A Year in Review
#### Price Declines Amid Surging Supply
At the beginning of 2023, cobalt prices reached their lowest level on an inflation-adjusted basis, with nominal prices nearing decade-lows. The primary driver of this downturn has been a significant increase in cobalt production from the Democratic Republic of the Congo (DRC), which accounts for approximately 80% of the world’s cobalt supply. Simultaneously, demand from the electric vehicle market has remained tepid. Consequently, cobalt sulfate prices plummeted to an average of $3,556 per tonne in January, starkly contrasting with their peak of nearly $19,000 per tonne in 2022.
#### Supply Chain Adjustments: Export Bans and Collaborations
By early 2024, copper production in the DRC surged, leading to a near 40% increase in cobalt output. However, to address the oversupply, the DRC government imposed a four-month ban on cobalt exports. This rapid shift caused the price of cobalt sulfate to rebound, climbing over 60% in March to average around $5,767 per tonne, with prices holding steady into April.
Meanwhile, Indonesia’s rising nickel output has also contributed to increased cobalt byproduct production. The DRC is currently in negotiations with Indonesia regarding potential collaborations and quota management to stabilize the cobalt supply.
### Evolving Demand in Battery Technologies
#### Strong Uptick in EV Battery Consumption
Demand for cobalt has rapidly transformed, with its consumption in EV batteries outpacing that in other sectors, such as aerospace. New analysis from Adamas Intelligence indicates that the battery cobalt market’s size surged to an estimated $152.4 million in March, reflecting a staggering 120% increase compared to February. This marks the highest value since December 2022, underscoring the market’s responsiveness to evolving demand for battery metals.
#### Comparisons with Other Battery Metals
Despite March being a strong month for the EV industry overall, cobalt significantly outperformed other key battery metals. Nickel prices increased by 41%, while lithium’s value rose by 28%, with both metals still affected by a weaker sales environment at the beginning of the year. This resilience of cobalt underscores its unique standing within the battery metals market, even as the broader EV landscape evolves.
### Competitive Landscape: The Rise of Alternative Battery Technologies
#### The Shift Towards Lithium Iron Phosphate (LFP)
Looking ahead, however, long-term prospects for cobalt in the EV market may appear less bright. The increasing shift towards lithium iron phosphate (LFP) batteries is leading to a diversion of market share away from nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminum (NCA) chemistries. Data from Adamas Intelligence highlights remarkable growth rates for iron and phosphorus used in batteries, suggesting a potential structural shift within the battery sector.
For instance, in 2024, deployments of iron and phosphorus surged by 54% and 49%, respectively, while cobalt’s deployment grew by only 7%. This shift signals a broader industry trend, emphasizing the need for miners to align their production strategies with the changing preferences in battery chemistry.
### The Future of Cobalt and Market Implications
The largest battery manufacturer globally, CATL, announced plans to initiate commercial production of sodium-ion batteries by the end of 2025. While sodium-ion technology has limitations, its introduction may further challenge LFP’s dominance rather than impact NCM batteries directly. For stakeholders in the cobalt supply chain, these developments reaffirm the importance of agility and foresight in adapting to market dynamics.
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As the cobalt market continues to navigate through fluctuating prices and evolving demand, understanding these factors is essential for stakeholders across the EV battery landscape. The rise of alternative battery technologies underscores the necessity for ongoing innovation, not just in material extraction but also in developing more adaptable and efficient battery solutions that align with consumer demands and environmental considerations. Time will tell how these changes will influence the future of cobalt and the broader battery industry.