Cobalt has started 2018 on a high note, hitting a new nine-year high of $34.25/lb in recent weeks as global demand is exploding on the back of the electric vehicle (EV) revolution.
For those of you new to the space, Cobalt has many uses but fills its most crucial role as an ‘energy metal’ used to make lithium-ion batteries, which in turn have become the backbone of the ‘Fourth Industrial Revolution’, the result of which is a 150% price hike over the last 12 months alone.
Thanks to government support and consumer demand for EVs, cobalt has seen more than a threefold price increase in the past two years, as miners and automakers scramble to secure upstream supplies.
Global cobalt supplies of just less than 100,000t entered deficit-territory during 2016 and the supply gap is expected to widen significantly going forward. China has tight control over refined output, currently producing more than half of the world’s refined cobalt and 85% of cobalt oxides, salts and other chemicals.
Overall cobalt demand is expected to rise by a compounded annual growth rate (CAGR) of about 6.9% from 2016 to 2020, with battery-related demand expected to grow at 11.7% CAGR from 2016 to 2022.
Of course, with so much focus on EV’s, it can be easy to forget that the current cycle of rising cobalt prices actually started with the advent of mobile electronic devices such as smartphones, which use on average about 5g to 20g of the metal per device. However, the EV revolution is forcing demand to scale exponentially, using about 4kg to 14kg per vehicle.
Analyst forecasts point toward EVs reaching cost parity with internal combustion engines by 2025, and an incredible 140 new Tesla-sized gigafactories will be required by 2035 to satisfy battery demand, in an optimistic scenario. That’s a lot of high-tech factories in a short space of time, owned by companies competing for cobalt supply.
Cobalt 27 has stockpiled physical cobalt holdings of 2,982.9t – the largest cobalt holding outside of China – and one that continued to increase in value since the company launched last year. Of course, we’re not playing for short-term gain here.
Based on unique supply constraints and rising demand, cobalt is looking very good over the short, medium and long term. With that in mind, we feel very confident in our ability to continue delivering on our business strategy in order to build shareholder value, while minimizing risk.