There's no magic bullet out there.
https://www.bloomberg.com/graphics/2018-cobalt-batteries/
Hype Meets Reality as Electric Car
Dreams Run Into Metal Crunch
By
Elisabeth Behrmann,
Jack Farchy and
Sam Dodge
January 11, 2018
When BMW AG revealed it was designing electric versions of its X3 SUV and Mini, the going rate for 21 kilograms of cobalt—the amount of the metal needed to power typical car batteries—was under $600.
Only 16 months later, the price tag is approaching $1,700 and climbing by the day.
For carmakers vying to fill their fleets with electric vehicles, the spike has been a rude awakening as to how much their success is riding on the scarce silvery-blue mineral found predominantly in one of the world’s most corrupt and underdeveloped countries.
Rapid Rise
Cobalt prices stage one of the biggest jumps among commodities
$80K per metric ton
July 2017
Britain announces it will ban the sale of diesel and petrol cars in 2040
70
60
50
Sept. 2016
BMW announces e-Mini and e-X3 SUV
Sept. 2017
BMW announces a total of 12 new e-car models
40
March 2016
Tesla announces Model 3
30
20
2016
2017
2018
Source: London Metal Exchange
“It’s gotten more hectic over the past year,” said Markus Duesmann, BMW’s head of procurement, who’s responsible for securing raw materials used in lithium-ion batteries, such as cobalt, manganese and nickel. “We need to keep a close eye, especially on lithium and cobalt, because of the danger of supply scarcity.”
Like its competitors, BMW is angling for the lead in the biggest revolution in automobile transport since the invention of the internal combustion engine, with plans for 12 battery-powered models by 2025. What executives such as Duesmann hadn’t envisioned even two years ago, though, was that they’d suddenly need to become experts in metals prospecting.
Automakers are finding themselves in unfamiliar—and uncomfortable—terrain, where miners such as Glencore Plc and China Molybdenum Co. for the first time have all the bargaining power to dictate supplies.
“They’re a lot bigger—but the reality is guys like us are holding all the cards,” said Trent Mell, chief executive officer of First Cobalt Corp., which is mining the mineral in northern Ontario and setting up talks with automakers seeking long-term supplies.
A creuseur, or digger, descends into a copper and cobalt mine in Kawama, Democratic Republic of Congo.
Complicating the process is the fact that the cobalt trail inevitably leads to the Democratic Republic of the Congo, where corruption is entrenched in everyday business practices. The U.S. last month slapped sanctions on Glencore’s long-time partner in Congo, Israeli billionaire Dan Gertler, saying he used his close ties to Congolese President Joseph Kabila to secure mining deals.
There’s also another ethical obstacle to negotiate. The African nation produces more than 60 percent of the world’s cobalt, a fifth of which is drawn out by artisanal miners who work with their hands — some of whom are children. The country is also planning to double its tax on the metal.
Mined Cobalt Output in 2016
Democratic Republic of the Congo dominates supply of the silvery-blue metal
14% Other
4% Australia
3% Russia
3% Zambia
60% Democratic
Republic of the
Congo
3% New Caledonia
3% Cuba
4% Philippines
6% Canada
Source: Macquarie Research Report, October 2017
Automakers may not have the luxury of choice as countries across the world ban gas and diesel engines to slash carbon emissions.
If each of the billion cars on the road were replaced today with a Tesla Model X, 14 million tonnes of cobalt would be needed—twice global reserves. Even a more realistic scenario for people to drive 30 million electric cars by 2030 requires output to be more than trebled, according to a study commissioned by Glencore from commodity analysts CRU Group.
The projections have made the lustrous metal, a byproduct of copper and nickel mining, into one of the most coveted commodities. Its price surged 128 percent in the past 12 months, in part because hedge funds including Swiss-based Pala Investments stockpiled thousands of tonnes of the stuff, which is used to power everything from mobile phones to home electronics.
“There just isn’t enough cobalt to go around,” said George Heppel, a consultant at CRU. “The auto companies that’ll be the most successful in maintaining long-term stability in terms of raw materials will be the ones that purchase the cobalt and then supply that to their battery manufacturer.”
To adjust to the new reality, some carmakers are recruiting geologists to learn more about the minerals that may someday be as important to transport as oil is now. Tesla Inc. just hired an engineer who supervised a nickel-cobalt refinery in New Caledonia for Vale SA to help with procurement.
But after decades of dictating terms with suppliers of traditional engine parts, the industry is proving ill-prepared to confront what billionaire mining investor Robert Friedland dubbed “the revenge of the miner.”
Scarce Metal
As electric car production takes off, cobalt supplies are projected to fall short of demand
Passenger electric vehicles
Electric buses
Consumer electronics
Other
500K metric tons
400
300
200
Projected
100
Supply
0
2005
2010
2015
2020
2025
2030
Sources: Bloomberg New Energy Finance, USGS, Avicenne, CRU
Take Volkswagen AG. The world’s biggest automaker has one of the industry’s most ambitious targets for battery car sales. Cobalt producers spurned its attempt in September to get long-term cobalt supplies at prices fixed well below market rates. Two months later, Volkswagen wooed them to meetings at its 30,000-seat stadium in the German city of Wolfsburg, hosting each in a separate hospitality box.
The carmaker has eased its price demands and may succeed in securing cobalt supplies this year, according to people familiar with the talks.
