In early March, I was shocked to learn that only 6% of the world’s cobalt is produced as a primary mine product while 94% is produced as a by-product of nickel and copper mining. I found those ratios alarming because:
-Cobalt is an essential raw material in all high-energy lithium-ion batteries;
-While conservative analysts forecast that the battery industry’s cobalt requirements will double over the next 10 years, rapid and sustained growth in electric vehicles (EVs), stationary energy storage and other lithium-ion battery applications could drive that demand multiple much higher;
-By-product availability is always dependent on sales of the primary metal and miners cannot respond to increased demand for by-product metals that aren’t matched by increased demand for their primary products;
-With nickel and copper both trading at multi-year lows, mining companies are suspending operations at marginal nickel, copper and cobalt mines worldwide; and
-Due to these mine closures, cobalt production is expected to fall in 2016 and remain at lower levels until nickel and copper demand recovers and mines return to production.
As I noted last week, the battery industry’s apparent failure to understand supply and demand dynamics in the cobalt market is a due diligence debacle that may well be the biggest “oops” in the history of supply chain management.
While my earlier articles suggested that most competitive users of cobalt are in a better position than the battery industry when it comes to defending their supply chains in times of price volatility and shortages, I didn’t offer detailed evidence to support that conclusion.
For the rest of this article, click here: http://investorintel.com/market-analysis-intel/cobalt-a-coffin-nail-for-cheap-lithium-ion-batteries/