Battery metals have risen to the forefront of attention in 2021, as major economies continue to embark on green recoveries from the Covid-19 pandemic. Cobalt, in both its metallurgical and chemical forms plays an important role in this increasing transition to greener energy infrastructure and transportation methods.
Prices for cobalt remained resilient throughout the uncertainty of 2020, and have trended significantly higher in 2021, with LME cobalt spot prices breaching US $50,000/tonne in February 2021 up from US $32,209/tonne in December 2020, according to media reports.
Cobalt demand is driven primarily by batteries, with super alloys in a distant second, Fitch points out. Increased battery demand for autos manufacturing will be accompanied by strengthened demand for cobalt to produce lithium-ion batteries for renewable energy storage and 5G-compatible technology.
Battery storage for renewable energy will be supported by capacity expansions in both solar and wind power, with Fitch’s power analysts forecasting respective global capacities of 807GW and 793GW in 2021. This represents an increase of 43.4% in wind power and 60.4% in solar power capacity since 2018.
On the supply-side, continued growth in the DRC’s cobalt mining sector will struggle to keep pace with increasing consumption in the coming quarters, Fitch notes. The DRC will continue to dominate mined cobalt production, accounting for approximately 68.0% of mined cobalt in 2020 even amid the covid-19 pandemic.
In 2021, Fitch forecasts cobalt production in the DRC to witness healthy growth of 12.0% y-o-y, aided by ramp-ups and a resumption of work on Chemaf’s Mutoshi processing plant. Supply will also benefit from the increasing formalisation of the artisanal cobalt mining sector, but the continued closure of Glencore’s idled Mutanda mine through 2021 will limit gains, Fitch says.
Increasing technological advances pioneering cobalt-free batteries will pose a large threat to cobalt demand and thus prices in the long-term, Fitch says, adding that it expects cobalt to remain a staple in lithium-ion batteries for the next few years, and then increasing charging infrastructure and low-cost efficiency will cause lower-range, cobalt-free alternatives to become the battery of choice.
