Scarce, expensive cobalt essential for electric cars – by Terry Cain (Globe and Mail – February 27, 2018)

The recent market turmoil has knocked back the value of most asset classes. But one group has held up surprisingly well. After rising dramatically in 2017, certain scarce metals, such as cobalt and lithium, continue to be hot commodities. In fact, the price of cobalt has set a new record high. So what is driving this rally, can it continue, and how can investors benefit?

The key factor driving these metals is surging demand for lithium-ion batteries. These power sources are the most popular kind of rechargeable batteries used in home electronics, as well as electric vehicles. Production and sales of these batteries have taken off as global sales for these products surge.

As the name indicates, one of the key ingredients in lithium-ion batteries is lithium. The price of the silvery-white metal, sometimes called “white gold,” has spiked by nearly 500 per cent over the past five years, though it has pulled back in the first part of this year. Australia and South America are the main lithium producers.

But arguably the bigger story related to lithium battery demand is cobalt. The mineral has been used for thousands of years to add blue colour in ceramics, glass and pottery, but now its main demand is as a crucial ingredient in rechargeable batteries in electric vehicles where it extends battery life.

The supply side of the price equation is also boosting cobalt’s price. Cobalt is mostly retrieved as a byproduct from copper and nickel production. The price of those metals has been persistently falling, making production at many locations uneconomic.

The rising demand for cobalt has fuelled a dramatic increase in the metal’s price. Cobalt prices on the London Metals Exchange more than doubled in 2017, and rose to a record high early this year.

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