The EV Revolution – Reality Bites

I need to point out here that Lithium, half of which is produced from processing natural brines (high salt water solutions) that contain at most 1500 parts per million (0.15%) of lithium, but on the average are less than 500 ppm (0.05%), is relatively more accessible than cobalt. Even so, lithium, priced as metal, is more expensive than cobalt today. This is caused by extraction and processing costs, not relative abundance.

Let’s look at what the United States Geological Service says about the amount of cobalt produced, the remaining maximum production in the existing mines, and the amount of cobalt known to be present on the Earth’s dry land surface and on the sea floor.

COBALT

(Data in metric tons of cobalt content unless otherwise noted)

Domestic Production and Use: In 2017, a nickel-copper mine in Michigan produced cobalt-bearing nickel concentrate. Most U.S. cobalt supply comprised imports and secondary (scrap) materials. Six companies were known to produce cobalt chemicals. About 45% of the cobalt consumed in the United States was used in superalloys, mainly in aircraft gas turbine engines; 7% in cemented carbides for cutting and wear-resistant applications; 17% in various other metallic applications; and 31% in a variety of chemical applications. The total estimated value of cobalt consumed in 2017 was $575 million.

Salient Statistics—United States: 2013 2014 2015 2016

2017®

Production:
Mine® 120 760 690 650
Secondary 2,160 2,200 2,750 2,750 2,800
Imports for consumption 10,400 11,300 11,400 12,800 12,100
Exports 3,850 4,500 3,830 4,160 5,100
Shipments from Government stockpile excesses1
Consumption:
Reported (includes secondary) 8,170 8,650 8,830 9,010 8,600
Apparent (includes secondary)2 8,660 8,710 10,300 11,500 9,830
Price, average, dollars per pound:
U.S. spot, cathode3 12.89 14.48 13.44 12.01 26.60
London Metal Exchange (LME), cash 12.26 14.00 12.90 11.57 24.70
Stocks, yearend:
Industry 1,070 1,410 1,320 1,220 1,200
LME, U.S. warehouse 41 9 165 195 185
Net import reliance4 as a percentage of
apparent consumption 75 75 73 76 72
 

 

 

Recycling: In 2017, cobalt contained in purchased scrap represented an estimated 33% of cobalt reported consumption.

Import Sources <2013-161: Cobalt contained in metal, oxide, and salts: Norway, 16%; China, 15%; Japan, 11%; Finland, 9%; and other, 49%.

Tariff: Item Number Normal Trade Relations 12-31-17
Cobalt ores and concentrates Chemical compounds: 2605.00.0000 Free.
Cobalt oxides and hydroxides 2822.00.0000 0.1% ad val.
Cobalt chlorides 2827.39.6000 4.2% ad val.
Cobalt sulfates 2833.29.1000 1.4% ad val.
Cobalt carbonates 2836.99.1000 4.2% ad val.
Cobalt acetates 2915.29.3000 4.2% ad val.
Unwrought cobalt, alloys 8105.20.3000 4.4% ad val.
Unwrought cobalt, other

Cobalt mattes and other intermediate

8105.20.6000 Free.
products; cobalt powders 8105.20.9000 Free.
Cobalt waste and scrap 8105.30.0000 Free.
Wrought cobalt and cobalt articles 8105.90.0000 3.7% ad val.
Depletion Allowance: 22% (Domestic). 14% (Foreian).

Government Stockpile:

Stockpile Status—9-30-175

 
Material6 Disposal Plan Disposals
Inventory FY2017 FY 2017
Cobalt 302 —
Cobalt alloys (gross weight) 0.271 —
 

 

 

Events, Trends, and Issues: Congo (Kinshasa) continued to be the world’s leading source of mined cobalt, supplying more than one-half of world cobalt mine production. With the exception of production in Morocco and artisanally mined cobalt in Congo (Kinshasa), most cobalt is mined as a byproduct of copper or nickel. In 2017, average annual cobalt prices more than doubled, owing to strong demand from consumers, limited availability of cobalt on the spot market, and an increase in metal purchases by investors. Growth in world refined cobalt supply was forecast to increase at a lower rate than that of world cobalt consumption, which was driven mainly by strong growth in the rechargeable battery and aerospace industries. As a result, the global cobalt supply was expected to remain limited in the near term. China was the world’s leading producer of refined cobalt and a leading supplier of cobalt imports to the United States. Much of China’s production was from ore and partially refined cobalt imported from Congo (Kinshasa); scrap and stocks of cobalt materials also contributed to China’s supply. China was the world’s leading consumer of cobalt, with nearly 80% of its consumption being used by the rechargeable battery industry.

World Mine Production and Reserves: Reserves were revised based on Government or industry reports.

  Mine production Reserves7
  2016 2017e  
United States 690 650 23,000
Australia 5,500 5,000 81,200,000
Canada 4,250 4,300 250,000
Congo (Kinshasa) 64,000 64,000 3,500,000
Cuba 4,200 4,200 500,000
Madagascar 3,800 3,800 150,000
New Caledonia9 3,390 2,800
Papua New Guinea 72,190 3,200 51,000
Philippines 4,100 4,000 280,000
Russia 5,500 5,600 250,000
South Africa 2,300 2,500 29,000
Zambia 3,000 2,900 270,000
Other countries 7.600 5.900 560.000
World total (rounded) 111,000 110,000 7,100,000
 

 

World Resources: Identified cobalt resources of the United States are estimated to be about 1 million tons. Most of these resources are in Minnesota, but other important occurrences are in Alaska, California, Idaho, Michigan, Missouri, Montana, Oregon, and Pennsylvania. With the exception of resources in Idaho and Missouri, any future cobalt production from these deposits would be as a byproduct of another metal. Identified world terrestrial cobalt resources are about 25 million tons. The vast majority of these resources are in sediment-hosted stratiform copper deposits in Congo (Kinshasa) and Zambia; nickel-bearing laterite deposits in Australia and nearby island countries and Cuba; and magmatic nickel-copper sulfide deposits hosted in mafic and ultramafic rocks in Australia, Canada, Russia, and the United States. More than 120 million tons of cobalt resources have been identified in manganese nodules and crusts on the floor of the Atlantic, Indian, and Pacific Oceans.

Substitutes: In some applications, substitution for cobalt would result in a loss in product performance. Potential substitutes include barium or strontium ferrites, neodymium-iron-boron, or nickel-iron alloys in magnets; cerium, iron, lead, manganese, or vanadium in paints; cobalt-iron-copper or iron-copper in diamond tools; copper-iron-manganese for curing unsaturated polyester resins; iron, iron-cobalt-nickel, nickel, cermets, or ceramics in cutting and wear- resistant materials; iron-phosphorous, manganese, nickel-cobalt-aluminum, or nickel-cobalt-manganese in lithium-ion batteries; nickel-based alloys or ceramics in jet engines; nickel in petroleum catalysts; and rhodium in hydroformylation catalysts.

“Estimated. — Zero.

‘Cobalt metal. In 2014-17, the Defense Logistics Agency acquired cobalt-bearing battery precursor materials and cobalt alloys.

2Defined as net import reliance + secondary production, as estimated from consumption of purchased scrap.

3As reported by Platts Metals Week. Cobalt cathode is refined cobalt metal produced by an electrolytic process.

4Defined as imports – exports + adjustments for Government and industry stock changes for refined cobalt.

6See Appendix B for definitions.

6See Lithium for information about cobalt-containing materials for use in lithium-ion batteries.

7See Appendix C for resource and reserve definitions and information concerning data sources.

8For Australia, Joint Ore Reserves Committee-compliant reserves were about 390,000 tons.

9Overseas territory of France. Although nickel-cobalt mining and processing continued, the leading producer reported zero reserves owing to recent nickel prices.

Interpreting the Data and Ignoring the Consequences

The data above do not show the costs of maintaining current global production levels nor the costs and consequences for price of increasing the output from existing mines. Nor do they show the state of cobalt extraction from its “ores,” which is among the least efficacious of such metal specific processing technologies.

The consensus of cobalt users today is that at least half of current world production, or 50,000 tons per annum, is irreplaceable in the wide variety of critical technological uses described by the USGS above in the paragraph entitled “substitutes.” Thus half of today’s demand is inelastic, for the indefinite future it will not change (and should increase over the long run as India and Africa industrialize!). Thus, nearly half of today’s global new production is spoken for outside of the battery market.

So, the only way to increase cobalt availability is by increasing the output of existing mines or the development of new ones.

Existing cobalt producing mines are primary copper or nickel mines. They are the source of 95% of the newly produced cobalt in the world, and nowhere are such mines operated solely to produce companion metals. Even at today’s cobalt prices its grades (concentrations) as companion metals and the inefficiency of its recovery, separation, and purification cannot justify increases in cobalt’s, production as a sole purpose for increasing the output of the primary metals. Traditionally, in fact, cobalt bearing concentrates (residues from copper and nickel refining) are processed by specialist companies that are not necessarily the original mining companies. China today, unsurprisingly, dominates cobalt “refining” with some three-fourths of global cobalt refining capacity now resident in China itself.

The publications of the analysts from many of the English-speaking world’s leading institutional investment funds and banks confidently describe an ongoing increase of cobalt demand, already underway, they say, solely due to its increased use to manufacture batteries. Yet even those of them who understand that such increases will require billions of dollars of existing mine expansion   and billions more in new mine development fail to discuss the impact such an agenda would have on the price (and thus the underlying financial driver) of the vast increase in primary copper and nickel mining this would entail or, even if acknowledging this, on the crash in prices of the metals, copper and nickel, due to the creation of a vast oversupply of each of them that this would entail. Such a crash would of course bankrupt the copper and nickel miners and/or terminate the production of both of them as well as of 95% of the cobalt.

Finally with regard to copper and nickel mining both are becoming more expensive with time, since both are facing grade deflation; the highest and best grades of copper and nickel have been mined out. The industries now face declining grades, which mean more work to produce less and less product. The neoliberal fantasy of price driving production increases fails completely where natural resources are concerned. There is only so much accessible metal, and there is only so much capital that can be allocated to its new production without creating large amounts of new capital (profits!) to feed the need for more and more work to produce the same amounts of metal. In the case of land based production of cobalt this capital allocation has reached its limit. The mining industry cannot afford or raise sufficient capital to increase cobalt production significantly in the face of the declining accessibility of land-based cobalt.

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