Viewpoint: Cobalt feedstock to stay in surplus globally

: Battery materials, Metals
24/01/04

Cobalt feedstock will likely remain in oversupply this year as some major mining firms with operations in the Democratic Republic of Congo (DRC) and Indonesia continue to expand output capacities.

The feedstock surplus comes as use of lithium-iron-phosphate (LFP) has surpassed ternary cathode active material (CAM) applications in the electric vehicle (EV) battery sector. LFP batteries do not require cobalt.

Intermittent price upswings for copper and nickel — from which cobalt is produced as a byproduct — have led to cobalt capacity expansions since 2021 among some major mining firms in the DRC and Indonesia, the world's main production hubs for cobalt feedstock.

Argus estimates that global supply of cobalt will increase by 13pc from 2023 to 245,000t of metal equivalent this year.

The increment is to largely come from expansions at the KFM and Kinsevere copper-cobalt mines in the DRC owned by Chinese diversified metal producer CMOC and mining company MMG respectively, as well as Chinese battery metal firms Huayou Cobalt's Huafei, GEM's QMB and Ningbo Lygend's mixed nickel-cobalt hydroxide precipitate (MHP) projects in Indonesia.

Others that are being developed include Chinese metals producer Jinchuan's Musonoi copper-cobalt project in the DRC; DRC's mining firm Chemaf's Mutoshi copper-cobalt mine; and Indonesian MHP projects invested in by Chinese battery CAM producers GEM, Huayou, Brazilian mining firm Vale and US automaker Ford. These facilities are expected to gradually come on stream by the end of 2024 or in the next few years.

LFP outweighs ternary CAM

LFP batteries have maintained a cost advantage over ternary batteries following Beijing's cut to and subsequently removal of purchase subsidies for new energy vehicles (NEVs), as well as deeper declines in lithium prices in China throughout 2023 compared with cobalt prices.

Argus-assessed prices for 99.5pc grade lithium carbonate averaged 258,806 yuan/t ($36,000/t) ex-works in 2023, down by around 54pc from 2022, while Argus-assessed prices for 20.5pc grade sulphate averaged Yn38,469/t ex-works in 2023, down by around 53pc on the year.

Installed volume of LFP power batteries in China exceeded that of nickel-cobalt-aluminium/nickel-cobalt-manganese NCA/NCM ternary batteries for the first time in July 2021 since the start of 2019, when NCM/NCA batteries had a higher market share. LFP power batteries have since gained a stronger position in the Chinese market following the central government's decision to curtail purchase subsidies for NEVs during 2021-22 and abolish the policy in early 2023.

Demand for LFP CAM surpassed that of ternary CAM in China in 2021 and in the global market in 2022 respectively. Demand for LFP CAM was about 50pc more than for ternary CAM in 2023, Argus estimates.

Multiple automakers outside China have begun using LFP cells or are considering using them to lower their EV manufacturing costs. US-based Tesla has switched all of its standard-range vehicles to LFP batteries since the end of 2021. US EV maker Rivian likewise plans to transition its standard battery packs to LFP. South Korea's Hyundai in March 2022 unveiled a plan to ramp up its use of LFP batteries. European carmakers and battery producers have also taken steps towards using new battery chemistries, which has quickly built out new supply architecture for LFP and sodium-ion batteries in recent years. And Chinese battery producer Gotion started supplying LFP batteries to Volkswagen (China) in 2022, with plans to ship LFP batteries to Volkswagen outside China in the future.

Market participants expect LFP to continue to dominate the power battery CAM market globally in 2024. Argus estimates that global LFP output will reach 1.9mn-2mn t this year, up by 30pc from 2023 and far above the 1.1mn t of NCM output forecast for 2024, up by 10pc on the year.

Demand for cobalt-containing ternary CAM is expected to rise at a slower pace than for LFP, market participants said, meaning cobalt demand growth should continue to lag behind the rise in cobalt supplies.

Global cobalt demand will rise by 8.7pc from 2023 to 215,000t of metal equivalent this year, Argus predicts, but this may exacerbate the cobalt surplus given an estimated supply rise of 13pc over the same period.

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25/04/24

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25/04/24

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