In just over a year the price of producing a car battery has increased by 300%. Suddenly the industry must query its status within the ‘renewable’ energy sector–asking the question: how to circumvent the escalating cost of a natural resource; Cobalt.
For carmakers vying to fill their fleets with electric vehicles, the spike has been a rude awakening as to how much their success is riding on the scarce silvery-blue mineral found predominantly in one of the world’s most corrupt and underdeveloped countries.
“It’s gotten more hectic over the past year,” said Markus Duesmann, BMW’s head of procurement, who’s responsible for securing raw materials used in lithium-ion batteries, such as cobalt, manganese and nickel. “We need to keep a close eye, especially on lithium and cobalt, because of the danger of supply scarcity.”
Automakers are ﬁnding themselves in unfamiliar—and uncomfortable—terrain, where miners such as Glencore Plc and China Molybdenum Co. for the ﬁrst time have all the bargaining power to dictate supplies.
Complicating the process is the fact that the cobalt trail inevitably leads to the Democratic Republic of the Congo, where corruption is entrenched in everyday business practices. The African nation produces more than 60 percent of the world’s cobalt, a fifth of which is drawn out by artisanal miners who work with their hands — some of whom are children. The country is also planning to double its tax on the metal.
If each of the billion cars on the road were replaced today with a Tesla Model X, 14 million tonnes of cobalt would be needed—twice global reserves.
The projections have made the lustrous metal, a byproduct of copper and nickel mining, into one of the most coveted commodities. Its price surged 128 percent in the past 12 months, in part because hedge funds including Swiss-based Pala Investments stockpiled thousands of tonnes of the stuff, which is used to power everything from mobile phones to home electronics.
“There will be a shortage of supply of cobalt going forward as and when the electric vehicle story unfolds” predicted Ivan Glasenberg, chief executive ofﬁcer of Glencore, which is in talks with Volkswagen, Tesla, Apple Inc. and various battery makers.
Even if carmakers manage to lock in orders, there’s another major cobalt player to contend with: China. Seven of the 10 largest producers in Congo as of 2016 were Chinese-owned, and the Chinese State Reserve Bureau stockpiles the mineral. Most cobalt mined in Congo, meanwhile, is puriﬁed at reﬁners in China before it can be used by battery makers such as Panasonic Corp.
If history is a guide, the cobalt mania won’t last. In the early 2000s, palladium, used in catalytic converters that remove pollution from vehicle exhaust, tripled in two years on supply concerns. Carmakers eventually found ways to use less of the metal, and demand slid by a third. Ford Motor Co. was forced to write off $1 billion when its stockpile of the metal fell in value.
However, the concern this time is far more imminent. The industry needs solutions faster than the rate at which cobalt is being extracted. The drive for innovation should find its catalyst in Formula E, the premier sport which acts as a facade for the wider industry. Just as Formula One has historically been the testing ground for leading innovations in engineering, Formula E will now take the reigns and champion the solution to the question posed by the finite resources of cobalt. A movement further fueled by their affiliation to electrical tech giant, ABB. Together they should ensure cobalt is no longer seen as Electric’s kryptonite