Soaring demand in the battery manufacturing sector has sent the price of cobalt soaring to its highest level since 2008. So far this year, the price of the metal has jumped 70% to US$56,500 per tonne.
Cobalt has been a key ingredient in tires and smartphones. It has also been used to colour glass and ceramics.
However, now the metal, along with lithium is benefitting from its use in lithium-ion batteries that are used to power electric vehicles.
Roughly half of all cobalt bought or sold last year was used in rechargeable batteries. That is up from 20% from 2006.
It has been widely reported that a group of large scale battery pack makers led by electric vehicle giant
Tesla Inc. (
NASDAQ: TSLA,
Forum) will require a steady supply of essential raw materials, including cobalt, lithium and graphite.
Investor interest in this sector is fueled by news that a number of so-called “gigafactories’’ planned by Tesla, LG Chem Ltd., Foxconn Technology Group, BYD Co., and Boston-Power Inc. are scheduled to increase demand for those commodities once they come on line within the next five years.
However, prices tend to be volatile as the majority of transactions involve only a handful trading houses that specialize in the metal.
Also, cobalt is generally produced as a by-product of other metals, including copper and nickel. Roughly 64% of global production is sourced from the Democratic Republic of Congo.
That has prompted some investors to buy the mineral and stockpile it in warehouses instead of investing in companies that produce it.