Cobalt has strong fundamentals long term Despite the current cobalt price crash due to the supply boost ahead of the actual EV revolution take-off, cobalt has strong fundamentals:
Demand will remain robust as the EV industry gathers pace. Less supply coming into the market and at the same time, car makers are pushing ahead with their ambitious EV plans. Government regulations, notably in China but also in other countries, will serve as a major boost for electric car adoption and whatever boosts EVs will boost battery metals required by the currently 70+ battery mega factories being build around the world.
These mega factories are being built almost exclusively to make lithium-ion battery cells, using two chemistry for the cathode; mostly nickel-cobalt-manganese (NCM) but also some nickel-cobalt aluminium (NCA).
The crystal structures of the NCM metals, when combined together, store lithium ions very efficiently. They also make the ions movement through the cathode to the anode easier than other metals.
There have been many articles, discussions and rumors in the last 12-18 months around attempts to potentially out-engineer cobalt from the cathode chemistry due to implied concerns with respect to supply chain issues. However, with the current low-range cobalt prices and plenty of sound investment opportunities/juniors with cobalt reserves available on the market, this has become less interesting commercially. And perhaps even more important, electrical vehicle manufactures highly prefer and like the safety properties cobalt brings to the EV battery due to its unique high-temperature properties, which is much greater than those of any alternatives.
Most NCM chemistry is currently based on the 6:2:2 ratio design for the cathode, 60% nickel, 20% cobalt and 20% manganese. Since cobalt is the most expensive component, the industry has been exploring potential use of 8:1:1 NCM ratio design for the cathode. However, NCM 811 is a more sensitive chemistry than NMC 622 so its production will require not only improved synthetic processes, but likely also additional post-processing steps. All of this will inevitably increase the manufacturing costs, as well as have some kind of an impact to/effect on the safety properties.
Hence, with current low-range cobalt prices and plenty of cobalt reserves around, the vast majority of the battery mega factories are build and designed for producing battery cells with NCM 6:2:2 cathode chemistry. And even if in due time (years down the road) this would evolve to 8:1:1, the market will still require vast amounts of cobalt due to the major ramp up of the E-Mobility revolution in the coming years, assuring a strong growth in cobalt demand in the next 5-10 years and beyond, regardless of any possible shift from 6:2:2 to 8:1:1 in years to come.
Benchmark Minerals reported in 1Q 2019, that in the next decade the demand for cobalt is set to go up 6 times, at a minimum.
Whether the car industry plans and government regulations will truly start to unfold in 1, 2 or 3 years from now, it is upon us and bound to happen, and cobalt will boost again at such time that the EV revolution truly takes off.
Hence, I firmly believe that long term (5-10Y) investments in solid cobalt mines with proven reserves and a strong management, is a calculated road to success.