The Cobalt Boom -

Zambian Business Times - - COMMODITIES -

How much is de­mand ex­pected to grow? Global de­mand for cobalt in the bat­tery sec­tor alone has tripled since 2011 and is ex­pected to con­tinue on this tra­jec­tory, ris­ing from 46,000 met­ric tons in 2017 to around 190,000 met­ric tons by 2026, ac­cord­ing to the in­dus­try an­a­lyst Bench­mark Min­eral In­tel­li­gence. The price of the metal has also soared, reach­ing more than $30 per pound by late 2017, up from an av­er­age of $18 in 2011. Where are the world’s known cobalt re­serves? Most of the world’s cobalt sup­ply comes from the DRC, part of Cen­tral Africa’s cop­per- belt. The south east­ern city of Lubum­bashi, in Katanga Prov­ince, is viewed as the coun­try’s min­ing cap­i­tal. Aus­tralia and Cuba have the sec­ond- and third-largest cobalt re­serves, re­spec­tively, fol­lowed by the Philip­pines, Zam­bia, Canada, and Rus­sia. The United States is far down the list, hold­ing just 23,000 met­ric tons in re­serves. What does the cobalt min­ing in­dus­try look like? The gov­ern­ment in a coun­try with cobalt re­serves, such as the DRC, grants per­mits to a small num­ber of min­ing com­pa­nies. Dom­i­nat­ing the cobalt ex­trac­tion mar­ket are the Swiss firm Glen­core PLC and China Molyb­de­num Co., among a few oth­ers. Once granted rights to a par­tic­u­lar site, Glen­core, as one ex­am­ple, extracts the cobalt dur­ing cop­per min­ing and sells it to a bat­tery chem­i­cal pro­ces­sor, most likely a Chi­nese firm, such as Zhe­jiang Huayou Cobalt. This com­pany sells the re­fined prod­uct in its chem­i­cal form to a bat­tery com­po­nent man­u­fac­turer, which then sells its prod­uct to a bat­tery maker, say South Korea-based LG Chem or China-based CATL. Ar­ti­sanal min­ers in the DRC, known by the French word for dig­gers, creusers, are re­spon­si­ble for up to one-fifth of the cobalt com­ing out of the coun­try, adding yet an­other facet to the metal’s com­plex sup­ply chain. There are roughly two hun­dred thou­sand creusers [PDF] in cop­per-cobalt mines, ac­cord­ing to gov­ern­ment fig­ures, though two mil­lion peo­ple may be min­ing var­i­ous min­er­als across the coun­try. In 2014, the UN Chil­dren’s Fund es­ti­mated that forty thou­sand chil­dren were work­ing in mines. The gov­ern­ment opened the in­dus­try to creusers fol­low­ing the col­lapse of the state min­ing com­pany in the 1990s, though they are re­stricted to sites where in­dus­trial min­ing is not vi­able. What are some of the in­dus­try’s chal­lenges? Rigid sup­ply. The cobalt in­dus­try is gen­er­ally con­sid­ered in­flex­i­ble be­cause pro­duc­tion de­pends almost en­tirely on the eco­nomics of cop­per and nickel min­ing. This means that ris­ing global de­mand for cobalt is not enough to drive more cobalt min­ing, es­pe­cially if prices dip for the base met­als. . (As of 2015, the only place where cobalt was the prin­ci­pal min­eral mined was Morocco.) DRC po­lit­i­cal risks. Many in­dus­try an­a­lysts, com­pa­nies, and gov­ern­ments have raised con­cerns over the con­cen­tra­tion of cobalt min­ing in the DRC, which has long been plagued by cor­rup­tion and po­lit­i­cal volatil­ity. Should in­sta­bil­ity dis­rupt min­ing op­er­a­tions, no other coun­try would be able to in­crease pro­duc­tion enough [PDF] to meet global de­mand, write ex­perts from the U.S. Ge­o­log­i­cal Sur­vey. If push does come to shove, the cobalt that is al­ready in China will stay in China. Cas­par Rawles, Bench­mark Min­eral In­tel­li­gence Chi­nese sup­ply-chain dom­i­nance. Chi­nese firms pro­duce more than half of the world’s re­fined cobalt and more than three-quar­ters of the world’s cobalt chem­i­cals—the form needed for lithium-ion bat­ter­ies—and many non- Chi­nese man­u­fac­tur­ers are wor­ried about their fu­ture ac­cess to the min­eral. “If push does come to shove, the cobalt that is al­ready in China will stay in China, for Chi­nese pro­duc­ers, rather than ex­ported to ex­ter­nal bat­tery com­pa­nies,” says Cas­par Rawles, a cobalt an­a­lyst for Bench­mark. Hu­man rights and en­vi­ron­men­tal haz­ards. Ad­vo­cacy groups have raised alarm over un­safe work­ing con­di­tions and the use of child la­bor in mines, par­tic­u­larly in the DRC, as well as en­vi­ron­men­tal dam­age, in­clud­ing air and water pol­lu­tion. The DRC’s ar­ti­sanal min­ing sec­tor is vir­tu­ally un­reg­u­lated, al­low­ing rebel mili­tias and cor­rupt gov­ern­ment sol­diers to con­trol min­ing sites. As a re­sult, many work­ers are vul­ner­a­ble to in­jury, long-term health prob­lems, and death. How are the var­i­ous in­dus­try play­ers re­spond­ing? Faced with in­creased com­pe­ti­tion and the pos­si­bil­ity of a cobalt crunch, car and bat­tery mak­ers such as Pana­sonic, Sam­sung, Tesla, and Volk­swa­gen are jock­ey­ing to se­cure a steady sup­ply. Some man­u­fac­tur­ers are go­ing di­rectly to the source in­stead of com­po­nent sup­pli­ers: In 2018, both Ap­ple and Sam­sung were re­port­edly in ne­go­ti­a­tions to buy long-term sup­plies of the metal di­rectly from min­ers, a kind of deal that Bench­mark’s Rawles says may be­come more com­mon as the global sup­ply tightens. At the same time, Ger­man au­tomaker Volk­swa­gen signed deals with sev­eral Asian firms for tens of billions of dol­lars worth of bat­tery com­po­nents. Some of the largest bat­tery mak­ers are seek­ing to avoid the Kinshasa-Bei­jing sup­ply chain al­to­gether, turn­ing in­stead to Aus­tralia and Canada, coun­tries with more mod­est cobalt re­serves, to di­ver­sify their sourc­ing. In the DRC, Pres­i­dent Joseph Ka­bila has sought to take ad­van­tage of the cobalt boom: In March 2018, his gov­ern­ment in­creased roy­al­ties and taxes on min­ing firms with the aim of boost­ing state rev­enue. How­ever, some an­a­lysts, such as re­searcher Ben Radley, ar­gue that min­ing com­pa­nies will likely use con­tro­ver­sial ac­count­ing prac­tices to avoid the new taxes. Mean­while, China sees elec­tric cars as a strate­gic in­dus­try, and it is pur­su­ing a range of poli­cies in­tended to put the coun­try in a dom­i­nant po­si­tion, in­clud­ing ve­hi­cle sub­si­dies, pro­duc­tion quo­tas, and higher fuel econ­omy stan­dards. It has also made moves to lead over­sight of the cobalt sup­ply chain. In 2016, its cham­ber of com­merce for met­als es­tab­lished the Re­spon­si­ble Cobalt Ini­tia­tive, com­pris­ing more than two dozen mem­ber com­pa­nies, in­clud­ing Ap­ple, BMW, Dell, Huawei, LG Chem, Sam­sung, Sony, and Volvo. Other groups are ex­plor­ing the use of blockchain tech­nol­ogy to track the cobalt sup­ply chain. Pres­i­dent Don­ald J. Trump has sought to pre­vent the United States from be­com­ing re­liant on foreign min­eral re­sources, in­clud­ing cobalt. In late 2017, he di­rected fed­eral agen­cies to iden­tify new sources of “crit­i­cal min­er­als” and in­crease do­mes­tic min­ing and pro­duc­tion. Cobalt is also among more than two dozen raw ma­te­ri­als [PDF] the Euro­pean Union has de­clared “crit­i­cal,” not­ing the risk of sup­ply short­age and po­ten­tial reper­cus­sions for the re­gion’s econ­omy. Are there al­ter­na­tives to cobalt? Re­search into de­creas­ing the amount of cobalt in lithium-ion bat­ter­ies or re­plac­ing cobalt with al­ter­na­tive met­als or com­pounds in bat­ter­ies has swelled in re­cent years. As one ex­am­ple, some bat­tery mak­ers have ex­plored boost­ing the amount of nickel in elec­tric car bat­ter­ies to take the place of some cobalt. Ex­perts warn, how­ever, that they may not be as cost-ef­fec­tive and that, with­out the same qual­i­ties that make cobalt such an at­trac­tive com­po­nent, re­plac­ing the high-de­mand metal with some­thing else could jeop­ar­dize prod­uct per­for­mance. Fea­si­ble al­ter­na­tives us­ing less cobalt are years away, while wholly new bat­tery tech­nolo­gies may not be ready for com­mer­cial test­ing for decades.

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