GRAPH: Cobalt price plunge and the EV market

Cobalt sulphate (min. 20.5% cobalt delivered) entering the EV battery supply chain in China averages 26,500 yuan or $3,655 per tonne in January, down from peaks of over $20,000 and $18,000 a tonne in 2018 and 2022, respectively. 

In a recent note, BMO Capital Markets pointed out that in fact real cobalt prices are at the lowest in history based on annual average prices adjusted for inflation going back to the late 1920s using USGS data.

Nearly all cobalt output is a byproduct of nickel and copper mining.  Copper production in the Congo is rising fast leading to a near 40% jump in the country’s cobalt output in 2024. The DRC already accounts for 80% of global cobalt supply, estimated to have exceeded 300,000 tonnes in 2024. 

Cobalt byproduct output is also increasing in Indonesia, responsible for more than half the world’s nickel supply after years of expansion.

BMO says there is no support to stop prices from falling further with prices crashing through the historical floor provided by small scale swing suppliers: 

“Cobalt is no stranger to oversupply, and at this point we would typically see the market balancing via the reduction in artisanal output in the DRC. However, the cobalt market is now so large that it cannot be balanced by the removal of artisanal mining alone.”

BMO has not found enough evidence to suggest smaller DRC producers have begun switching off their cobalt circuits and believes government strategic stockpiling is not sufficient to absorb supply and only signs of cobalt tailings formation (to be recovered if and when prices improve) would suggest a price floor has been reached. 

On the demand side, the outlook is also far from rosy. 

The EV market is still expanding at a healthy clip and 2025 will almost certainly be the first calendar year that total passenger EV battery capacity deployment – a better indicator battery materials demand than unit sales alone – exceeds 1 terawatt hours according to Adamas Intelligence, a Toronto-based EV supply chain research firm.  

This would constitute a different world than 2017 when the then largest cobalt producer Glencore first touted the coming boom for cobalt from the nascent EV industry. That year 38 GWh of EV battery power rolled onto the globe’s highways and byways.   

While cobalt consumption in EV batteries, the source of the bulk of cobalt demand, continues to rise, it is well below the blue-sky forecasts made not that long ago. 

The market share of cobalt-free batteries such as lithium iron-phosphate, or LFP, continues to expand rapidly.  In China, the share of LFP on a GWh basis was 65% in November, the most recent month with detailed data. 

At the same time, per vehicle cobalt use in NCM (nickel-cobalt-manganese) and NCA (nickel-cobalt-aluminium) batteries is also drifting lower due to ongoing thrifting and a trend towards high-nickel cathodes (less than 10% cobalt), particularly in markets outside China.  

The fact that Chinese automakers are prolonging their use of mid-nickel batteries (roughly 50% nickel, 20% cobalt and 30% manganese) because the cost gap to LFP has narrowed substantially provides only cold comfort. 

The latest data from Adamas Intelligence tracking EV sales, battery capacity and chemistry in over 110 countries paired with monthly prices shows the size of the battery cobalt market is diminishing rapidly even as the total contained tonnes in newly-sold EVs increase.

Over the course of 2021, when the electrification of the global car parc reached 286 GWh, according to Adamas Intelligence data, the value of cobalt found in the battery packs of EVs sold that year came to $1.9 billion (and in the following year grew by another $540 million).

Last year that figure was down to $1.2 billion despite the installed cobalt tonnage having doubled since 2019 to just shy of an estimated 60,000 tonnes (keeping in mind that these are terminal installed tonnes and do not take into account yield losses during conversion, refining and manufacturing).

As the graph shows the reading of cobalt material costs on a sales-weighted average basis is even more dire. Every EV  sold globally, including plug-in and conventional hybrids, now averages just over $40 worth of cobalt. That number peaked in March 2022 at $260. 

For a fuller analysis of the EV battery metals market check out the February issue of the Northern Miner print and digital editions.

* Frik Els is Editor at Large for MINING.COM and Head of Adamas Inside, providing news and analysis based on Adamas Intelligence data.