Can recycling save the world from a looming shortage of cobalt?
The idea has sound precedent. Lead — an essential ingredient in traditional car batteries, just as cobalt will be for the coming generation of lithium-ion cells — is probably the most extensively recycled industrial raw material on earth. With cobalt demand from cars, electric buses and utility-scale batteries set to soar over the next decade, mining cobalt from spent batteries rather than the ground could go some way toward keeping the market balanced.
That’s the hope of Samsung SDI Co. The South Korean components company will sign a deal with a cobalt-recycling business to secure supplies from used mobile phones, Bloomberg News reported Tuesday, listing American Manganese Inc. and Umicore SA without saying whether either was under consideration for the tie-up.
It’s not the first major player to make such a move. BASF SE signed an agreement with MMC Norilsk Nickel PJSC last year to source cobalt and nickel from the Russian miner’s pits, while Volkswagen AG spent several months fruitlessly seeking to lock up long-term supply agreements, Reuters reported in December citing unnamed industry sources.
The barely suppressed sense of panic comes from the scale of the supply-side challenge facing cobalt.
Unlike other key battery materials such as lithium and graphite, in-ground mineral reserves of the metal have shown very little response to growing demand for rechargeable cells. Despite a doubling of mine production and a threefold increase in prices over the past 15 years, the U.S. Geological Survey estimates that the 7.1 million metric tons of cobalt that can be economically dug up is essentially unchanged since 2003.
There are sound reasons for that. With the exception of a single mine in Morocco, all the world’s cobalt is produced as a by-product of other metals — mostly copper in Africa, and nickel elsewhere. So price signals that would normally cause miners to ramp up supply are muffled, since the profitability of pits is governed by other elements.
Making matters worse, about half comes from the Democratic Republic of Congo, where long-standing corruption and governance issues are compounded by the use of child labor in mining that may account for as much as 10 percent of global cobalt supply. As if that wasn’t bad enough, the country’s Senate voted last month to double taxes on the metal.
Recycling has many advantages, but there is one huge drawback: It’s unlikely to be enough.
The 24,900 tons of annual cobalt production that consultants CRU Group estimate will come from old batteries by 2025 is quite a leap on the current 7,100 tons — but it’s a drop in the ocean next to the 147,000-ton increase in yearly demand that Bloomberg New Energy Finance forecasts by that date. The 31,000-ton rise in annual output from Glencore Plc’s Katanga mine over the next two years alone is almost double what CRU expects recyclers to contribute by the end of the period.
That’s why, as Gadfly argued last year, the industry’s best way of getting around its cobalt problems will probably come from changes in battery manufacturing.
The most popular lithium-ion cathode chemistry at the moment is also the most cobalt-intensive one — NMC111, which has roughly equal quantities of nickel, manganese and cobalt in the mix. The impact of current high cobalt prices on cell-makers’ profits and car companies’ costs ought to accelerate the shift toward varieties like NMC811, which is just 10 percent cobalt. Other alternatives, such as the cobalt-free chemistry that Johnson Matthey Plc announced in September, could further chip away at demand.
Samsung SDI’s recycling tie-up represents a smart insurance policy, but don’t expect it to change the world. If we’re to escape the cobalt supply crunch, it’s going to be cathode chemists, rather than miners and recyclers, who save us.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
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