Electric vehicles seen driving cobalt crunch by mid-2020s
24/05/2018 19:16
By Salvador Rodriguez
LAS VEGAS, May 24 (Reuters) - The increasing popularity of
electric vehicles may create a crunch for supplies of cobalt in
the early-to-mid 2020s, miners and analysts say, adding that
small operators trying to start up mines outside Africa could
play a bigger role over time in satisfying demand for the metal
used in rechargeable batteries.
The Democratic Republic of Congo (DRC) produces
nearly two-thirds of the world's cobalt as a by-product of its
copper mines and is taking an increasingly confrontational
stance toward foreign mining companies, including a new mining
code that hikes royalties and taxes.
Human rights groups have said some cobalt from the Central
African country could come from mines using child labor, raising
additional concerns about sourcing within the industry and among
buyers of the metal. urn:newsml:reuters.com:*:nL8N1QJ6MN
Cobalt is an important ingredient of current batteries and
brokerage UBS described it in a report this week as "the
commodity which could stall the exponential growth in electric
vehicles."
While supplies from Congo are expected to remain the most
important factor in global supply for years, exploration and
development companies at the 2018 Cobalt Institute conference in
Las Vegas this week said potential buyers looking to lock in
supplies were eager for projects in other countries.
“There’s going to be a big demand from organizations, end
users and battery makers that will want to secure supply that’s
non-DRC just because of all of the political risks to that
supply,” said Brendan Borg, managing director of Celsius
Resources Ltd CLA.AX , an Australian mining company that hopes
to begin production in Namibia by 2021.
More than 100 companies mining or exploring for cobalt are
listed on the Toronto Stock Exchange and TSX Venture Exchange,
up from fewer than 30 in 2015, according to SNL Financial. The
exploration companies, known in Canada as junior miners, are
considering locations ranging from Indonesia to Namibia, Canada,
and Idaho and Utah in the United States.
Those explorers will need more funds, though, to bring
production on line.
“The industry needs to see more investments particularly in
those exploration stage projects,” Caspar Rawles, an analyst
with Benchmark Mineral Intelligence, said on Wednesday.
Benchmark provides research for mining companies and
manufacturers.
Demand for electric vehicles, using cobalt in batteries,
could spark a deficit of cobalt as soon as 2022, he said.
At least 90,000 tonnes of additional cobalt will be needed
by 2025 to meet demand, UBS said in the May note, basing its
forecast on expectations that electric vehicle penetration will
grow to 16 percent globally, up from about 1 percent currently.
Demand and supply were in balance at about 100,000 tonnes in
2017, UBS said, projecting an oversupply for several years
turning to a deficit in the mid-2020s.
Sean Bromley, director of Pacific Rim Cobalt Corp BOLT.CD ,
a Canadian company that hopes to begin drilling in Indonesia in
the next couple of months, foresees a deficit in supply around
2020 or shortly thereafter.
“We think around 2020 (the EV market) will really begin to
take off," he said on Wednesday. "Seeing some of the battery
companies' expansion plans has reinforced this view, and
speaking with commodity trading houses, they have indicated the
same thing."
Growing demand for the mineral has caused a spike in cobalt
prices CBD0 on the London Metal Exchange to more than $90,000
a tonne, up from about $22,000 a tonne in February 2016.
That is driving lots of discussions, said Peter Campbell,
vice president of business development at First Cobalt Corp
FCC.V , which recently announced the takeover of US Cobalt Inc
and its exploration properties in Idaho and Utah. He said
companies looking to secure supplies, in a sign of their need,
were talking to junior miners as much as six years away from
production.
(Reporting by Salvador Rodriguez in Las Vegas and Nicole
Mordant in Vancouver
Editing by Peter Henderson and Matthew Lewis)
((salvador.rodriguez@thomsonreuters.com
+1 281-409-3516))