by Greg Klein | March 17, 2017
Should all go to plan, the transformation from dirty to clean energy might come to be symbolized by this German coal producer. A longstanding idea to convert mine shafts to hydro chutes got further encouragement in a March 14 speech reported by Bloomberg. North-Rhine Westphalia state governor Hannelore Kraft has declared her support for a project that would convert the Prosper Haniel coal mine into a pumped storage facility.
Referred to as a type of battery, it would use excess wind or solar energy to pump water from a reservoir at the depths of the mine to another reservoir above the shafts. When wind or solar fails to meet demand, the water would be released, plunging something like 1,300 metres to electricity-generating turbines.
A 2014 article on Grist.org said the mine could store up to about 990,000 cubic metres of H2O, “roughly the volume of the Empire State Building.” That could produce a 200 megawatt capacity, enough to power more than 400,000 homes, Bloomberg reported.
Prosper Haniel’s mining days are expected to end in 2018, when federal subsidies for the industry expire. Other mines could follow this reincarnation as the coal mining region of North-Rhine Westphalia intends to double its production of renewable energy to 30% by 2025, Bloomberg stated.
According to the National Energy Board, Canada’s only pumped storage facility is the 174 MW Sir Adam Beck station operated by Ontario Power Generation, which diverts water from the Niagara River to a 300-hectare reservoir. The transition from turbine to pumping sequence takes just minutes and occurs several times a day, the utility states.
The NEB attributes over 30 pumped storage facilities to the U.S., producing about 23,000 gigawatt hours a year but using about 29,000 GWh to do so. “Despite this net loss of energy, the grid reliability provided by PSH facilities and the ability to generate when demand is strong is highly beneficial and will become increasingly important as Canada and the U.S. integrate more renewable power into their grids.”
by Greg Klein | March 9, 2017
With an eye to national defence, American lawmakers will decide whether their government should help develop domestic supplies of rare minerals. A Congressional bill introduced March 7, Rep. Duncan Hunter’s proposed METALS Act (Materials Essential to American Leadership and Security) would offer a number of inducements to create supply lines for strategic and critical commodities.
“The U.S. must no longer be wholly dependent on foreign sources of strategic and critical materials,” said Hunter, a veteran of two combat tours in Iraq and one in Afghanistan. “The risk of this dependence on national security is too great and it urgently demands that we re-establish our depleted domestic industrial base.”
Pointing to China’s lockhold on over 90% of global rare earths supply, Hunter argued the U.S. has “ceded” its ability to produce REEs. Following the bankruptcy of the last U.S. rare earths miner, Molycorp “sold a portion of its assets to the Chinese,” said a statement from Hunter’s office. “The mine is now being considered for purchase by a firm with ties to a Russian billionaire.”
As reported by the Wall Street Journal last month, a group including Vladimir Iorich’s Pala Investments has offered US$40 million for Molycorp’s former Mountain Pass mine in California. The METALS Act would prohibit foreign acquisition of American rare earths deposits.
It would also provide five-year interest-free loans for new production or manufacturing techniques involving strategic or critical minerals. Additionally, Washington would reimburse defence programs for higher costs of domestic products. Funding would divert 1% of Department of Defense administration spending, Hunter said.
The act would also bar foreign interests from sourcing American supplies of ammonium perchlorate, a propellant for rockets and missiles. The bill further calls for a study on the viability of using thorium-fuelled nuclear reactors in naval vessels.
Besides encouraging supply chains essential to national security, the bill “supports the U.S. domestic industrial base by aiding domestic investment opportunities,” according to Hunter’s office.
Speaking with ResourceClips.com last month, David S. Abraham expressed skepticism about Hunter’s proposal. “Most bills on critical materials have not passed and his bills usually have the least chance of passing…” said the author of The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. “That’s not to say the U.S. hasn’t given money to metallurgy and mining before, but with the exception of some dabbling in beryllium in the ’90s, I can’t recall a time where the U.S. was really investing in mines from a defence perspective.”
But Washington defence lobbyist Jeff Green told ResourceClips.com of “a totally different dynamic” in circles of power that would be willing to “invest in America to protect our national security and grow our manufacturing base.”
A January report from the U.S. Geological Survey stated the country was wholly dependent on foreign sources for 20 minerals last year, some of them considered critical or strategic “because they are essential to the economy and their supply may be disrupted.”
As of press time Hunter’s office hadn’t responded to an interview request.
by Greg Klein
Something of an epiphany came to him in 2010 as he watched the aftermath of a minor incident in internationally disputed waters. China’s shock-and-awe response turned its near-monopoly on rare earths into a mighty geopolitical weapon, exposing the perilous nature of our dependence on seemingly obscure commodities. That inspired David S. Abraham’s 2015 book The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. Now, as a similar confrontation threatens to flare up again, he sees the West still unprepared for further attacks on vital supply lines.
Asked whether people in power have at least gained greater awareness, his response is a firm No.
Speaking on the phone from Indonesia, Abraham took time to discuss the issue with ResourceClips.com. The 2010 event, of course, began with the China-Japan territorial dispute in the East China Sea. Late last year American warships entered the South China Sea, in another challenge to China’s claim to sovereignty. Yet compared with previous years, “I think we’re even more vulnerable to shock in our supply lines,” he says.
“If you look at rare earths, in 2010 there were opportunities for new supplies to come onstream quite quickly, and they’ve since failed. People look at that failure and say these places couldn’t compete, they couldn’t produce economically, so they failed.”
China, having pushed up prices exponentially by withholding rare earths, swung to the other extreme and flooded the market. That dashed the hopes of many potential non-Chinese producers yet encouraged complacency among end-users. “But the supply lines themselves really look no different than they did back then,” Abraham cautions.
Of course the problem’s hardly limited to rare earths. Just one example Abraham points to is cobalt and the Democratic Republic of Congo. Estimates of DRC supply range from 51% of the world total (2015 figures from the U.S. Geological Survey), to nearly 60% (Benchmark Mineral Intelligence), to 65% (Disruptive Discoveries Journal). That gives a disproportionate amount of supply not only to a single country, but one plagued with political instability and conflict mining.
Troubling too is the ownership.
Already a major player in the country, China stands to increase its DRC position should China Molybdenum and a Chinese private equity firm succeed in their $3.8-billion purchase of a majority interest in Tenke Fungurume, one of the world’s biggest copper-cobalt mines. With a 20% stake, the DRC state-owned company Gécamines has tried to block the sale but reportedly accepted a $100-million settlement.
What you see China doing is really consolidating up the supply line…. What they’re trying to do is build up their material capacity so other people producing batteries have to use material coming through China.—David S. Abraham
“What you see China doing is really consolidating up the supply line…. What they’re trying to do is build up their material capacity so other people producing batteries have to use material coming through China.”
The country fosters economic growth by “adding to the value chain that they can produce in their own country. It’s a strong economic argument. It’s not dissimilar to what Trump says, but he hasn’t really gone into the deep thinking that’s happening in China.”
Certainly, China’s strategic approach contrasts with the West. That’s suggested by the example of Tenke Fungurume’s would-be vendors, the American/Canadian team of Freeport-McMoRan NYSE:FCX and Lundin Mining TSX:LUN.
“For those companies, it’s about profits,” Abraham acknowledges. “The question is, what are the technology companies thinking about? Companies like Apple are trying to do a better job of understanding where their materials come from, but some of the others are less concerned.”
With the U.S. military in mind, Rep. Duncan Hunter is anticipated to propose a congressional bill that would help develop domestic supplies of rare minerals.
Abraham’s skeptical. “Most bills on critical materials have not passed and his bills usually have the least chance of passing…. That’s not to say the U.S. hasn’t given money to metallurgy and mining before, but with the exception of some dabbling in beryllium in the ’90s, I can’t recall a time where the U.S. was really investing in mines from a defence perspective.”
If decision-makers lack awareness, they’re not alone, he believes. Abraham sees little evidence that consumers understand the issues. “People talk about being concerned about where these materials come from but they really have to understand the challenging supply lines, and that’s what the book was trying to introduce people to,” he says. “It’s still a little too complex to fathom and I don’t think people think beyond ‘my phone causes conflict in Congo’ and get to the point that ‘my phone leads to geopolitical war.’”
If so, that makes The Elements of Power as timely now as it was in 2015. A paperback edition comes out in April.
In concluding the phone call, Abraham offers a maxim: “Nothing changes very fast. Then everything changes all of a sudden.”
The Chart of the Week is a Friday feature from Visual Capitalist.
Tesla’s Gigafactory 1 has been a centre of attention for people interested in the growing momentum behind green energy, electric cars and battery production. Therefore, it is no surprise that this facility was in the news again last month, with Tesla starting to mass-produce batteries as it ramps up to its goal of 35 GWh of capacity and beyond.
However, as exciting as this project is, it’s actually just one of multiple large-scale “megafactories” being built—with many of them being in China.
China leading the charge
We talked to Simon Moores, managing director at Benchmark Mineral Intelligence, who explained that Tesla isn’t alone or unique in its ambitions to build lithium-ion batteries at scale:
While the Tesla Gigafactory is vitally important from an EV vertical integration perspective, the majority of new lithium-ion battery capacity is being built in China. Some of these plants are expected to be huge, such as the CATL facility at 50 GWh—there is little doubt that China’s lithium-ion industry has come of age.
Contemporary Amperex Technology Ltd (CATL) has plans to build the largest lithium-ion megafactory of all—but the company is little known in North America. It’s already worth $11.5 billion and could be a dominant force globally in the battery sector if it successfully increases its lithium-ion production capacity six-fold to 50 GWh by the year 2020.
Other Chinese manufacturers are on a similar trajectory. Panasonic, LG Chem and Boston Power are building new megafactory plants in China, while companies such as Samsung and BYD are expanding existing ones. Lithium-ion plants in China currently have a total capacity of 16.4 GWh—but by 2020, they will combine for a total of 107.5 GWh.
Capacity by country
This ramp-up in China means that the country will have 62% of the world’s lithium-ion battery production capacity by 2020.
There are only three other players in the megafactory game: United States, South Korea and Poland.
|2016 capacity (GWh)||2020 capacity (GWh)||% of global total (2020)|
Above estimates on battery capacity courtesy of Benchmark Mineral Intelligence.
Posted with permission of Visual Capitalist.
by Greg Klein
The timing seems ominous. As rival American and Chinese warships assert themselves in the disputed South China Sea, the United States Geological Survey reported 20 minerals on which the U.S. imports all of its supply. Included are rare earths—coming almost entirely from China, of course. It was a 2010 conflict in the same troubled waters between Japan and China that caused the latter country to cut off rare earths exports to its adversary. As other supply chains broke apart, REE prices went on an exponential tear. Might China do that again and, this time, are American decision-makers sufficiently concerned?
They should be, say some observers. Additionally, there also looms the possibility of a trade war sparked by U.S. tariffs on Chinese goods. Yet some REEs are necessary not only for consumer electronics and clean energy, but also for military defence.
The 20 entirely foreign-dependent minerals reported by the USGS represent an increase from 19 the previous year and 11 in 1984. The list includes rare earths, scandium and yttrium as three separate categories. In February 2016 Industrial Minerals reported that the U.S. Department of Defense “identified 15 of the 17 rare earths as critical over the last five years.”
Having foreseen as far back as 2009 the possibility of China using REEs as a geopolitical strategy, Jeff Green watches the topic from a defence perspective. “I think about the tools China has to retaliate and rare earths come right to the top of the list,” he says.
Green has recently served on the U.S. House Armed Services Subcommittee on Readiness. He’s a lawyer, a member of the U.S. Magnetic Materials Association and the REE World Advisory Board, a U.S. Air Force Reserve colonel and a former USAF missile combat crew commander. He describes his Washington firm J.A. Green & Company as “primarily a defence lobbying company that’s really interested in the nexus between national resource security and national security.”
He finds the U.S. government’s concern stronger and better informed than previously. That contrasts with events leading to what he calls the “Molycorp fiasco,” a supposed market solution to the 2010 shock and a strategy that he warned against. It went on to “burn the market to the tune of one and a half billion dollars.”
The result? “Today we’re probably in a more dire China-dependent situation than ever before.”
But Green sees hope in a Congressional bill that he anticipates being introduced within a week or so. Rep. Duncan Hunter’s proposal would help American companies develop domestic supplies of REEs and other minerals critical to defence. Assistance could come in the form of no-interest loans, Green says. Additionally the Department of Defense might pay more for American products made from American commodities, with the government reimbursing the difference between domestic and Chinese costs until American companies can compete.
It’s not a pure free market economic philosophy but one that will say: ‘If we’ve got a critical supply risk and we’ve got domestic companies that can fill that gap, then let’s invest in America to protect our national security and grow our manufacturing base.’—Jeff Green
As for the bill’s chances of success, Green’s optimistic. “You’ve got an administration that is very pro Buy American, Hire American. You’ve got a Congress that very much supports manufacturing. It will be much more pro-mining, pro-industry than we’ve seen. It’s not a pure free market economic philosophy but one that will say: ‘If we’ve got a critical supply risk and we’ve got domestic companies that can fill that gap, then let’s invest in America to protect our national security and grow our manufacturing base.’
“It’s a totally different dynamic than Washington’s seen in 40 years.”
Chris Berry agrees about the need for subsidies, among other assistance. In a research report last year the president of House Mountain Partners and editor of the Disruptive Discoveries Journal warned of the cost of not creating a supply chain outside China. In an e-mail to ResourceClips.com he notes that the “mine permitting, exploration and building process would all need to be expedited through legislation and through subsidies. This is the only way I see non-Chinese deposits being able to compete with China’s RE production costs. The good news is that as various technologies grow in importance (such as EVs) and existing processes grow as well (fluid cracking catalysts), this implies steady demand for REEs.”
While Berry considers the establishment of new supply chains “a multi-year endeavour,” he adds, “a focus on recycling or funding of materials science to minimize foreign dependence of these materials is a reasonable near-term solution to encourage supply chain development.”
As for the raw materials, Green maintains the U.S. has REE resources sufficient for defence needs, which he says are relatively small. “We’re not trying to compete globally in the automotive, magnet or catalyst markets,” he emphasizes. “We’re trying to protect our national security needs.”
Yet the Congressional bill calls for assistance to all aspects of the supply chain, he says, “whether that’s processing, refinement, separation, beneficiation, metal production, alloy production, magnet production.”
Support for supply chains would benefit other sectors, he points out. “This is the old NASA model. The government for years invested in new technologies and we’ve reaped the benefits in consumer advancements. Just look at the refining industry for petroleum products, at catalysts, phosphors in electronics, magnets for vehicles, battery materials. I think the commercial applications are terrific.
“I believe the president will kind of cheerlead this effort along,” he adds. “That’s really a game-changer. He’s going to take the traditional free trade model and turn it on its head. He’ll say the rest of the world doesn’t play by these rules so we’re going to play smarter—we’re going to treat our industries like the rest of the world treats theirs.”
by Greg Klein | January 31, 2017
Lacking any domestic sources at all, the United States imported 100% of its supply of 20 minerals last year, the USGS reports. That number increased from 19 the previous year and 11 in 1984. Included in the 2016 list were rare earths, manganese and niobium, “which are among a suite of materials often designated as ‘critical’ or ‘strategic’ because they are essential to the economy and their supply may be disrupted.”
Imports of rare earth compounds and metals increased 6% over 2015, although the value dropped from $160 million to $120 million. China supplied 72% directly, with other imports coming from Estonia (7%), France (5%), Japan (5%) and other countries (11%).
But the Estonian, French and Japanese material was derived from concentrates produced in China and elsewhere, the USGS added.
American imports of tantalum increased about 40% over 2015. The USGS attributed about 37% of 2016 global production to the Democratic Republic of Congo and 32% to Rwanda. Estimates reverse those numbers for the previous year.
An alphabetical list of the 20 minerals follows, with rare earths, scandium and yttrium each comprising a separate category:
The report listed 50 minerals for which the U.S. imported over half of its supply. Overall China was the largest exporter, with Canada running second.
by Greg Klein
The appeal to Western markets is obvious—an advanced, low-cost rare earths project in a friendly jurisdiction. So even before the recent military build-up in the South China Sea, Commerce Resources TSXV:CCE experienced an increase in American requests for concentrate samples from its northern Quebec Ashram deposit. With the U.S. Navy now challenging Chinese territorial aggression, the confrontation seems to pit two superpowers against each other. But what does that really indicate?
It’s actually “one lonely small old Russian-built carrier against three U.S. Nimitz-class supercarriers,” Commerce president Chris Grove points out. “So when Beijing says it’s going to take off the gloves, I think they’re referring to trade.”
That brings to mind the Senkaku incident, a much smaller 2010 confrontation in the same region that prompted China to cut off rare earths exports to Japan, sending global supply chains into turmoil and prices soaring. A possible Senkaku redux is one of a number of aspects to a global paradigm shift that Grove sees coming, to the benefit of Western industry in general and Ashram in particular.
The U.S. might easily outgun China, but China produces about 90% of the world’s rare earths. They’re essential to several defence needs, “a fact that really drives certain people in the U.S. absolutely apoplectic,” says Grove.
While Westerners have struggled to compete with China on costs, prices mean little to the U.S. Department of Defense, which last year began putting money behind potential domestic processors, Grove says. That support complements a multi-faceted advantage that the West is gaining over China, he explains. The latter country struggles with rising labour costs and the need to finally address its environmental woes. Meanwhile Western countries offset their labour costs with technological innovation and maintain the world’s highest environmental standards.
Even putting aside defence, demand for rare earths continues to grow with another global development. The international commitment to address climate change through clean energy, exemplified by the Paris Agreement, increases rare earths demand for numerous applications ranging from EVs to wind turbines.
In a research report last year, Chris Berry noted that “REE usage continues to grow at a pace well above global GDP growth with demand CAGRs growing anywhere from 4% to 8%, with permanent magnet demand forecast to lead this charge to 2020.”
Clearly there’s a market for non-Chinese sources. And Grove sees Ashram uniquely positioned to help serve that market. Certainly others have failed but, he emphasizes, they lacked Ashram’s benefits of mineralogy, metallurgy, grade and jurisdiction—all of which add up to lower costs.
The project reached PEA in 2012, with an amended PEA in 2015. Since then the company’s been busy on multiple fronts as it advances towards pre-feasibility.
Ashram’s advantage begins with its relatively simple mineralogy, with carbonatite host rock and rare earths within the minerals monazite, bastnasite and xenotime, which dominate commercial REE processing.
Pilot plant metallurgical tests have quadrupled the PEA’s concentrate grade, producing 41% total rare earth oxides and 43% TREO, both at 71% recovery. That puts the grade well within the range of commercial producers and does so through a single-leach process that simplifies the flowsheet.
Requests for concentrate samples have come from Solvay, Mitsubishi, Treibacher, BASF, DKK, Albemarle and Blue Line, among others covered by non-disclosure agreements.
Metallurgy has also found a potential fluorspar byproduct, offering an advantage to both revenue and opex. Grove credits Glencore Canada’s interest in fluorspar with the willingness of its NorFalco Sales division to supply Commerce with sulphuric acid on highly favourable terms.
Proud as he is of Ashram’s high-grade, near-surface resource, Grove anticipates an even more impressive upgrade. The current estimate uses a 1.25% cutoff to show:
Commerce has since drilled another 9,200 metres, mostly infill but always with some stepout holes as well. “In all those drill programs, we always hit mineralized material in the stepouts, we always encountered less waste rock at surface than was modelled in the resource and we always hit zones that were higher than the average grade,” he says.
Ashram’s magnet feed distribution also has Grove enthused. Overall, the deposit ranks with the largest producers for praseodymium, neodymium, terbium and dysprosium. Ashram’s medium-to-heavy REO resource, moreover, surpasses the producers for those elements. And, as Grove points out, those are critical elements. Efforts to find substitutes for magnet REEs have failed.
Companies with higher operating costs are probably praying for higher prices. Commerce Resources doesn’t need them. We still have a margin at today’s prices.—Chris Grove
Benefiting both Ashram’s opex and the environment would be wind energy, currently being studied for the project. Commerce’s environmental commitment as well as its community outreach have been recognized by the e3 Plus Award for social responsibility from l’Association de l’exploration minière du Québec.
The company has also received a $300,000 provincial grant to optimize tailings management, funding that shows Quebec’s commitment to mining as well as the environment. Grove calls the province “a fantastic jurisdiction,” one that invests directly in companies through Ressources Québec and makes tangible progress on the visionary Plan Nord infrastructure program.
Following a private placement of up to $2.5 million offered last month, Grove looks forward to a number of near-term milestones. Still to come are final assays from last year’s drilling. The agenda also calls for completing the pilot plant and filling requests for REE and fluorspar concentrate samples. The samples, Grove suggests, could spur interest in a JV or offtake agreement.
The Commerce quest for rare metals hasn’t been confined to rare earths. Last September sampling on the company’s property about a kilometre from Ashram found “spectacular” results up to 5.9% niobium pentoxide, described by Grove as “approximately double the grade of the largest and longest-running niobium producer’s head grade, CBMM’s Araxa deposit in Brazil.”
Commerce also holds the Blue River project in southeastern British Columbia. The property’s Upper Fir tantalum-niobium deposit reached PEA in 2011 and a resource update in 2013.
But Commerce remains very much focused on Ashram. Whether events in the South China Sea send RE prices soaring, Grove sees possible increases coming from producers boosting revenues. But, he emphasizes, Ashram doesn’t need higher prices. “Companies with higher operating costs are probably praying for higher prices,” he says. “Commerce Resources doesn’t need them. We still have a margin at today’s prices.”
Uranium miners up 59% on pro-nuclear hopes since U.S. election
The Chart of the Week is a Friday feature from Visual Capitalist.
Uranium’s spot price had a rough ride throughout the course of 2016, but for many investors there is suddenly a new aura of optimism around the troubled metal.
It all starts with Donald Trump’s “America First” strategy, which is being perceived by many as a potential boon to the uranium sector. Official details are slim, but industry executives are currently speculating that the Trump administration will be better for nuclear power than the previous government.
If that’s true, then it would mean far less regulatory hurdles for nuclear power, and likely even funding to bring more power plants online in the United States.
A shot in the arm
Perhaps such a catalyst is just what the metal needed. The spot price and the share prices of uranium miners have been in a gruesome bear market ever since the 2011 Fukushima incident in Japan. The prolonged pain has worn down investors and companies alike, but everything has to bottom at some point.
As David Erfle from Kitco pointed out last week, the chart for the Global X Uranium ETF (URA) makes any other downturn look like a piece of cake. The ETF, which tracks global uranium miners, has lost a whopping 90% of its value over the last six years, including two rollbacks (in 2013 and 2015).
Lately, thanks to the “Trump bump” and a 10% production cut in Kazakhstan announced earlier this month, the URA is suddenly buzzing with volume. The ETF is now back up on its feet, gaining a solid 59% since the election.
But can uranium be great again?
A bounce in uranium stocks is something that was way overdue. However, if nuclear-related announcements aren’t made soon from the Trump administration, the newfound optimism could fade pretty fast.
Statistically speaking, the World Health Organization says that nuclear power kills less people per terawatt hour than any other major source of power, even rooftop solar. Nuclear is also friendly from an emissions perspective: using a life-cycle emissions analysis, nuclear generates similar emissions to wind or hydropower.
The problem, of course, lies in the fat tail risk of a nuclear catastrophe, which is something that is still fresh in people’s minds in the wake of Fukushima.
Whether nuclear and uranium can be great again depends on the public’s tolerance for such projects, as well as a significant amount of support from the government to push new projects through. The rally is much welcomed by uranium investors—but it will remain unclear if it has any long-term legs until these two considerations are met.
Posted with permission of Visual Capitalist.
Every once in a while, a previously underappreciated metal rises to prominence. Several factors can cause this to happen: new technology, changing consumer preferences, supply constraints or skyrocketing demand can all bring an unknown metal to the forefront of discussion.
Cobalt could be the latest metal that fits this description. It’s a crucial metal to the boom in lithium-ion battery demand, but it also has an increasingly precarious supply chain that could be very volatile moving forward.
Why investors should look at cobalt
This infographic comes from eCobalt Solutions, a company focused on providing ethically produced and environmentally sound battery-grade cobalt salts. It presents the investment case for the relatively unknown metal.
With the green movement in full swing, there is compelling evidence that cobalt could be the next relatively unknown metal to rise to prominence. Here are the top 10 reasons that investors should look at cobalt:
1. Cobalt is one of the few metals used for superalloys.
Nearly 20% of all cobalt is used for superalloys—a class of high-tech metals that originally emerged to suit the high operating temperatures of jet engines. There are three main superalloy types:
Their use has extended into many other fields—and today, superalloys are used in all types of turbines, space vehicles, rocket engines, nuclear reactors, power plants and chemical equipment.
2. The green economy runs on cobalt.
There are many types of lithium-ion batteries, but the vast majority of li-ions sold today use cobalt in some capacity. In fact, by 2020 it is expected that 75% of lithium-ion batteries will contain cobalt. Why? It’s because cobalt is the most important metal for increasing the energy density of lithium-ion cathodes.
3. And green uses such as EVs are driving the upwards trajectory of cobalt demand.
By 2020, almost one-fifth of cobalt demand will stem from electric vehicles.
Total refined cobalt demand:
|Year||Demand||% xEV batteries||% Electronics batteries|
“Cobalt’s demand growth profile remains one of the best among industrial metals peers. Its exposure to rechargeable batteries continues to play a crucial role.”—Macquarie
4. Getting cobalt is the hard part.
Ninety-eight percent of cobalt is produced as a byproduct of copper and nickel mines. The problem? If copper and nickel production isn’t growing, then more cobalt isn’t mined to meet demand.
5. Why not find more cobalt?
It’s easier said than done. The vast majority of the world’s cobalt lies in risky regions like the Democratic Republic of Congo.
|Country||% Cobalt Supply in 2014|
6. And so supply can tighten.
Chemical cobalt, the kind used in batteries, is expected to fall into a growing deficit over the next few years. By 2020, CRU expects that deficit to be at least 12,000 tonnes.
7. Meanwhile, the U.S. government definitely doesn’t have any strategic stockpiles.
According to the U.S. Defense Logistics Agency, the government sold off cobalt all the way up to 2008. Now there are only 301 tonnes left in strategic stockpiles.
8. Cobalt was one of the best-performing metals in 2016.
9. Cobalt prices have been rising but they are nowhere near all-time highs yet.
All-time highs for cobalt prices happened in 2008, after the DRC government placed restrictions on export of ores and concentrates. For a brief stint, cobalt prices even exceeded $50 a pound. The current price? Roughly $16 a pound.
10. Many experts predict the cobalt market to be interesting to watch in 2017.
“Just how much cobalt is in stockpiles in China is the million-dollar question. Clarity here can materially affect the cobalt price.”—Chris Berry, House Mountain Partners LLC
“The refined cobalt market will fall into a 3,000-tonne deficit this year following seven years of overcapacity and oversupply. CRU anticipates prices to increase onward into 2017.”—Edward Spencer, CRU Group
“With this growth will come further disruption to the traditional market structures that have developed in cobalt over the last 30 years. In short, a new, more secure supply chain for the modern era will need to be created, a task that includes new mines, new refineries and a more transparent supply chain.”—Andrew Miller, Benchmark Mineral Intelligence