Car manufacturers rely on a number of different precious metals in the production process. Between key battery materials like Lithium, which is under a tight supply and seeing prices rise, other minerals are facing a different economic situations. Cobalt, a key battery metal, has fallen over 40 percent since mid-November, trading between $18.75 and $20.35 a pound. This decrease marks the lowest the commodity has reached in over two years.
Cobalt has seen a drastic drop in price just over the past year. Back in April 2018, the metal reached a 10-year peak of over $40 a pound, which compelled many battery makers to invest in lower-cobalt battery designs. However, the massive drop in prices will likely ease fears for current battery technology and help ease a swifter rollout of electric cars. At the same time, many companies could be tempted to lock in prices in long term contracts with miners.
“Not only will this enable [carmakers] to feel more secure about future pricing and act more aggressively on their electric vehicle production ramp-up plans, but longer-term deals may also sustain higher levels of cobalt use in [battery] cathode technology,” said Benchmark Mineral Intelligence analyst Caspar Rawles, according to The Financial Times.
Many companies in the battery supply chain already have stockpiles of cobalt saved up, with the market not likely to be low in supply going forward into 2019. The Democratic Republic of Congo produces two-thirds of the world’s cobalt, with an estimated $24 trillion in untapped mineral deposits in the country at the moment.
However, low prices won’t last forever, and are expected to return in the coming years. “The upward price movement is likely to be achieved through a combination of restocking, improved investor sentiment, supply disruptions and, last but not least, a strong underlying demand for electric vehicles,” said Benedikt Sobotka, chief executive at Eurasian Resources Group. “New energy vehicles remain the most potent driver for cobalt demand, and it is forecast that 2019 will see even strong growth rates than 2018.”
At the same time, however, many auto manufacturers are finding themselves in a tricky situation. Worried about fluctuations in supply as well as relying almost exclusively on an African country that has been unstable in the past, many carmakers are considering investing directly in cobalt mines to secure their own supplies in the coming future.
Ted Miller, senior manager for energy storage strategy and research at Ford Motor Co, spoke at a mining industry event in South Africa where he was worried that the auto industry was now in a tricky situation. “I fully anticipate we’re going to keep a lot of pressure on that cobalt production,” he said, adding that “we’re switching out cobalt dependency for nickel.”
Most auto manufacturers use nickel-manganese-cobalt batteries. However, Tesla Motors preferred battery technology only uses less than 3 percent cobalt in their nickel-cobalt-aluminum batteries. While cobalt isn’t as important for Tesla as it is for other carmakers, the company instead relies on lithium to a much larger degree, with only a couple weeks ago looking to buy lithium from Warren Buffet’s geothermal wells in the Salton Sea area.