Fortune Minerals : COBALT NEWS

Fitch Solutions - September 22, 2021

Key View The global cobalt supply chain is set to remain highly geographically concentrated in the coming years - in the DRC for mine ...

with EGC to finance as many as six strictly-regulated artisanalmining sites. Cobalt from the artisanal sites will feature QR tracing, in an

The global cobalt supply chain is set to remain highly geographically concentrated in the coming years - in the DRC for mine production and China for refining - which will likely pose procurement challenges for battery manufacturers…However, there is currently a solid global project pipeline, due to the rise in cobalt prices and the expected demand boom amidst the proliferation of battery manufacturing projects, which will aim to diversify to some extent production channels…The battery revolution will increasingly dictate cobalt production trends, with most of global refined cobalt being converted to chemical forms that are used in rechargeable batteries as opposed to cobalt metal that is mainly used in other industries…While we hold an optimistic view on new cobalt projects that are expected to come online the next decade, we highlight that risks to the completion of these projects are abound. Many are still in the pre-feasibility stage, especially in Australia, and may not reach fruition in the end due to lack of finance or environmental opposition for instance. Global cobalt projects are also likely to face environmental scrutiny, whereas the possibility of batteries without cobalt might dampen the metal's demand outlook and prices altogether…The global cobalt industry is set to receive a significant boost from the worldwide shift to a green economy, as the ferromagnetic blue metal is a key component of rechargeable batteries and valued for its stability, hardness, anti-corrosion and high-temperature resistance characteristics. Used historically as a pigment, due to its luminous blue colour, the metal's main use today is in the precursors and cathodes of rechargeable batteries (56% of total consumption as of 2021). Employing cobalt as the cathode of rechargeable batteries efficiently improves their energy density, power, and performance as compared to batteries that lack cobalt. Cobalt is also used in the manufacturing of nickel based alloys (13% of total consumption) which are used extensively in the aerospace industry, tool manufacturing (8% of total consumption) and finally smaller amounts in pigments, soaps and as catalysts. The end use of cobalt is primarily in portable electronics (36.3% of global consumption), such as smartphones and laptops, while automotive applications also account for a major share (23%) and we expect the latter to drive cobalt demand in the coming decades…The cobalt industry is highly geographically concentrated mine production wise, with a single country, the Democratic Republic of Congo (DRC), accounting for 67% of the global supply in 2020, and we expect this dynamic to continue over the coming decades…Cobalt refining is also highly concentrated in a single country, China, which will broadly remain the case…In our view, the main impediments to a smooth supply chain dynamic for cobalt is the lack of transparency in the cobalt market, and limited refining capacity outside China, which will continue to pose challenges for a time to come even if actual global supply is sufficient…Additionally, we note a growing trend of miners operating in the DRC to shift from open-pit mining (of oxidised orebodies) to underground mining (sulphide orebodies) as resources closer to the ground get depleted. However, this requires higher capital investments, and results in higher copper grades but lower cobalt grades, meaning the competitive landscape of cobalt mining in the DRC is fast shifting to the hands of larger players…China is the world's largest producer of refined cobalt, most of which is produced from cobalt intermediates imported from the DRC, and the country will continue to hold its reign on the downstream sector of the cobalt supply chain in the coming decades.