Cobalt Uses: Batteries and More

11:02' PM - Wednesday, 13/01/2021

Cobalt, whose name is derived from a German word meaning “evil spirits,” has been valued by humans since the Egyptians used it as a coloring agent.

Today, the metal is considered one of the world’s essential elements. With its high melting point and ability to maintain strength even at raised temperatures, it is useful in cutting tools, superalloys, surface coatings, high-speed steels and many other materials.

Below is an overview of those and other cobalt uses. While this critical metal is currently best known as a raw material in lithium-ion batteries, it has plenty of other applications investors should know about.

Cobalt has been used for thousands of years as a blue coloring agent in pottery, glass and ceramics. However, in recent years demand from more high-tech sectors has emerged. Today, cobalt is used in batteries for electric cars and in energy storage, alloys and more.

The battery sector in particular has become an important source of cobalt demand. Demand for lithium-ion batteries, which require cobalt, is surging, and analysts expect that this demand will drive the cobalt market in the coming years. At the same time, cobalt supply could tighten substantially due to human rights abuses in the Democratic Republic of Congo (DRC), where most cobalt is produced.

Supply and demand

Cobalt is mainly produced as a by-product of copper and nickel, and as mentioned the DRC supplies the bulk of the world’s cobalt. Most cobalt in the DRC comes from an area known as the Copperbelt. It holds one-third of global cobalt reserves and accounts for 40 to 50 percent of cobalt output in the DRC.

The DRC produced 100,000 metric tons of cobalt in 2019, far ahead of Russia’s 6,100 metric tons. The Eastern European nation was the world’s second-largest cobalt producer that year, while Australia and the Philippines were the third and fourth largest, respectively. Cobalt is currently produced in about a dozen countries worldwide.

As noted above, cobalt from the DRC is facing increasing scrutiny. While cobalt is not officially a conflict mineral, some human rights groups are pushing for it to receive that designation. Many DRC cobalt operations and mines are dangerous and poorly managed, and these groups believe that cobalt end users should be sourcing the metal elsewhere.

Cobalt demand is also important to look at. It’s tough to say exactly how much demand for the metal will increase in the coming years, but many experts agree that growth will be substantial. As noted, the lithium-ion battery market will be a huge driver of that demand, as battery production increases due to the expected surge in electric cars. Lithium-ion batteries are not only used in electric cars, but also other electronics.

The consensus seems to be that those supply and demand dynamics will push the cobalt market into deficit in the coming years. Benchmark Mineral Intelligence expects cobalt demand to increase four-fold, rising to 219,679 tonnes by 2023 and 276,401 tonnes by 2028, if full battery capacity is achieved.

Futures and stocks

Those circumstances have left many investors interested in cobalt investing. As CommodityHQ notes, there are two main ways to invest in cobalt: cobalt futures and cobalt stocks.

Cobalt futures can be found on the London Metal Exchange under the ticker CO. These futures began trading in early 2010 and are quoted in US dollars per tonne. Contracts range over a span of 15 months, allowing investors to make bets on the metal over varying time periods.

Another option to get exposure to the critical metal is to invest in cobalt-mining companies. Benchmark Mineral Intelligence Head of Price Assessment Caspar Rawles has recommended that any investor interested in investing in cobalt looks at copper and nickel companies that are mining or exploring for cobalt, “unless (they) are lucky enough to find a (junior with a) deposit that is primarily cobalt.”

He added, “I think the key for smaller companies is to be targeting value-added products further downstream than simply a concentrate, such as cobalt sulfate, targeting the battery supply chain.”

Our overview of TSXV-listed cobalt companies that have seen year-to-date gains includes a number of larger companies with exposure to cobalt, as well as some smaller companies looking to break into the space. It is a good place to start for those who are new to the industry. - investingnews -

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