According to industry experts, the cobalt market is currently under pressure due to an oversupply and slow demand. The heat is palpable more on cobalt sulfate prices, which are gradually declining, indicating weaker demand. One reason is China’s passenger electric vehicle (PEV) sector, which strongly prefers lithium-iron-phosphate (LFP) batteries that do not rely on cobalt.
China’s Move to LFP Batteries Weakens Cobalt Market
According to Shanghai Metals Market, margins for cobalt sulfate production using imported cobalt hydroxide turned negative in Q3 2023. This strained margin significantly impacted China’s cobalt sulfate output.
- From January to October 2023, combined production dropped by 28.1% compared to the same period last year.
The reason for the decline remains the same- a slowdown in the PEV sector. The other significant reason is automakers shifting to lithium-iron-phosphate (LFP) batteries as they are cost-effective and avoid using critical minerals like cobalt and nickel. This transition has reduced the demand for cobalt-containing batteries in China.
Unlocking Cobalt’s Role in Battery Chemistry
Cobalt remains a vital component in many battery chemistries, offering stability and safety benefits. In 2023, demand for cobalt-containing chemistries grew by 15% year-over-year (y/y) to approximately 500 GWh, accounting for 55% of total battery demand.
While this represents a decline from 63% in 2022, cobalt chemistries are expected to maintain a significant market share in the medium to long term as demand continues to grow. Let’s study how experts explain this evolving landscape…
A Shifting Landscape
Cobalt Institute’s latest report revealed that demand for cobalt was mainly driven by high and mid-nickel chemistries driving this growth in 2023. High-nickel chemistries saw a 32% increase, while mid-nickel grew by 15%. Meanwhile, low-nickel and lithium cobalt oxide (LCO) chemistries experienced declines of 11% and 13% y/y, respectively.
It further highlighted,
- Demand for cobalt-containing chemistries rose 15% y/y in 2023, to ~ 500
GWh. This equated to around 55% of battery demand in 2023, down from 63% in 2022.
High-nickel chemistries also increased their market share to 11%, while low-nickel chemistries fell behind nickel-cobalt aluminum oxide (NCA) chemistries for the first time.
These cobalt-free chemistries now make up 45% of global cathode demand, driven largely by lithium iron phosphate (LFP) batteries. For the first time, LFP overtook nickel cobalt manganese (NCM) cathodes, claiming a 45% market share compared to NCM’s 43%. While manganese-based chemistries also contributed, their impact was minor.
Beyond batteries, cobalt is needed in aviation, energy storage, and electronics and its recyclability makes it sustainable.
Image: LFP vs. NCM: the share of NCM battery cells declines
Source: Cobalt Institute report
Pressures Facing Cobalt
Cobalt, despite its critical role in batteries, faces significant challenges in the supply chain related to cost, composition, and sourcing. Cobalt is costly, but falling prices have improved battery cell cost competitiveness.
The report highlighted that in 2023, NCM and LFP chemistries dominated the global lithium-ion battery market, making up 88% of cathode demand. Automakers in North America and Europe preferred NCM batteries for their higher energy density and longer range, and they were mainly used in high-performance EVs.
On the other hand, LFP batteries have gained market share globally, particularly in China, where their lower cost and reduced reliance on critical minerals like cobalt make them a popular choice. This also means that although NCM chemistries have high energy density, they are globally less widely adopted.
Image: 2023 Cathode active materials (CAM) product mix from the major ex. China CAM suppliers, %
Additionally, ethical and environmental concerns regarding cobalt sourcing, particularly from the DRC and Indonesia, are extensively scrutinized for their sustainability and responsible extraction practices.
Cobalt Forecast 2024: Price and Production
As cobalt demand continues to face challenges with automakers favoring lithium-iron-phosphate (LFP) batteries, cobalt-containing batteries are considerably losing market share. CMOC expects cobalt-containing batteries to eventually make up less than 10% of the total battery mix.
Batteries now drive three-quarters of global cobalt demand, making the market highly sensitive to changes in cathode chemistries and technologies. As demand for EVs grows, cobalt’s role remains crucial, but the rise of alternatives like LFP will reshape the landscape.
The EV sector’s trajectory in key regions, including the US, China, and the EU, will play a critical role in shaping cobalt’s future. However, with battery technology shifting rapidly and economic policies uncertain, the path ahead remains unpredictable.
Supply Surge from CMOC, DRC, Australia, and Indonesia
The Democratic Republic of the Congo (DRC), Australia, and Indonesia are the three major countries that control about 73% of the world’s cobalt reserves. Last year, DRC topped the list, accounting for more than 70% of global production.
Source: Cobalt Institute
China’s CMOC, a major producer, has already surpassed its 2023 full-year cobalt production guidance by 21% within the first nine months.
In H1 2024, the company secured the position of the world’s largest cobalt producer with an impressive output of 54,024 tons, marking a staggering 178.22% year-over-year (YoY) growth. This surge not only reflects the company’s pivotal role in the global cobalt supply chain but also signifies a contribution to meet rising demand for battery-grade cobalt.
Notably, CMOC’s production surge is primarily linked to its copper-focused strategy that resulted in increased cobalt inventories.
From this report, we can fairly infer that cobalt can still hold its ground as a key material in high-performance batteries, particularly in Western markets. However, its future will depend on balancing cost, sustainability, and evolving technology trends.
