Looming EU decision threatens cobalt supply chain

New regulations on cobalt salts threaten to undermine the EU's push for an independent battery supply chain.

The regulations, proposed by the European Chemicals Agency (ECHA), would require companies handling cobalt salts to pay for the registration and use of the chemicals under REACH regulations and implement stringent safety measures to protect employees against exposure because of cancer risks. The salts include cobalt sulphate, cobalt dinitrate, cobalt dichloride, cobalt carbonate and cobalt di(acetate).

The ECHA Socio-economic Analysis Committee (SEAC) is meeting from 7-18 September to decide whether to proceed with the recommendations. They are widely expected to accept the scientists' advice. It would then be up to the European Commission to decide whether to implement them, with October the likely date for a final decision. Any regulations would have an 18-24 month implementation period.

While not amounting to a ban on the products, market participants warned that it could exclude all but the largest companies — such as Umicore and BASF — from handling cobalt chemicals and undermine Europe's efforts to establish a battery supply chain, because the high costs involved would exclude smaller players and discourage investment.

Industry data referenced within ECHA's public consultation indicates a "best estimate" cost of around €374mn ($442.6mn) a year (annualised) to industry for the favoured option laid out in February by the ECHA assessment panel in tackling exposure to the chemicals.

"The Cobalt Institute remains convinced that an EU-wide binding Occupational Exposure Limit would be preferable to a REACH Restriction for the five cobalt salts," said Adam McCarthy, president of the Cobalt Institute. "Our studies show that a binding Occupational Exposure Limit would protect more workers and prevent more cancer cases, while doing so at a more proportionate cost to industry with more streamlined regulation, which helps keep the EU in the global batteries race. At a time when Europe knows the green economy is essential for its future, this is a win-win for everybody."

Many European politicians have continued to stress the importance of developing an independent battery supply chain in the continent. Speaking in 2018 to mark the anniversary of the founding of the European Battery Alliance, Elzbieta Bienkowska, EU Commissioner for the Internal Market, Industry, Entrepreneurship and SMEs, said "this alliance is at the heart of our industrial policy. A strong battery industry is a perfect fit for our ambition to promote clean mobility ... If Europe wants to lead and compete with other big industrial players around the world, we need to hurry up."

If cobalt salts are too costly to produce and handle within the bloc, European battery manufacturers are likely to be reliant on suppliers in China and other Asian countries, such as Japan and South Korea. Investment in the battery supply chain could also move to lower-cost, low-regulation markets. Reliance on other markets would undermine the principal of an independent battery supply chain for the EU.

In early 2020, some car manufacturing operations in Europe were suspended because of a lack of parts due to the Chinese lockdown in response to Covid-19. Volkswagen halted production in early March because of disruption to its Chinese supply chains, before any lockdown measures were implemented in Europe, demonstrating the need for self-sufficiency. Covid-19 has led to calls around the world to roll back some globalised supply chains.

Cobalt is listed on the EU's critical materials list. The Critical Raw Materials Alliance, an industry lobbying group, said that cobalt is a "technology enhancer" and is "indispensable" to enhance the many metallurgical and chemical applications.

"The potential socio-economic impact and regulatory efficiency of policies or regulatory measures on critical raw materials must be well understood before they are proposed," the group's website warns.

By Thomas Kavanagh