- Soaring electric vehicle demand is chipping away at global battery metal supply.
- Demand for lithium and cobalt has skyrocketed, along with the prices of these key resources.
- As with many other commodities, demand and competition for cobalt have been heavily influenced by the war in Ukraine.
As the desire for electric vehicles increases, the demand for battery metals like lithium and cobalt continues to rise. Will this cause a global pinch on rare earth resources? Considering all the challenges facing metal commodities (and commodities in general), it remains a distinct possibility.
The Cobalt Craze and Mining Competition
China Molybdenum, a large mining company in mainland China, recently announced plans to invest in mining initiatives based out of the Democratic Republic of Congo. According to estimates, the firm plans to put a staggering USD $1.8 billion into these new efforts. The notoriously-unstable central African nation is particularly rich in minerals, boasting some of the world’s largest copper and cobalt mines. Of course, with so much cobalt sourced directly from DRC, China Molybdenum will have a firm hold on global cobalt buyers.
As with many other commodities, demand and competition for cobalt have been heavily influenced by the war in Ukraine. The subsequent sanctions on Russia have only further stressed the global cobalt trade. It’s hardly a surprise. Russia is second to the DRC when it comes to cobalt supply. As demand goes up, competition over mining resources has become quite grizzly. In fact, Russia recently announced it would go as far as to mine cobalt from sea beds if necessary.
Last week, MetalMiner published an article about Norilsk Nickel, Russia’s top cobalt producer. The company’s President, Vladimir Potanin, had just been added to the sanctioned individuals list, causing prices on the LME to shoot up 6%. When combined with ongoing sanctions, the news could mean that having more cobalt available will not benefit Russia in the short term.
California‘s Lithium Tax Affecting Battery Metals As Well
Along with cobalt, the logistics associated with many other rare earth metals are also becoming more challenging. For instance, California recently approved a flat-rate tax on lithium. According to many industry experts, it’s a move that means big trouble for mining companies in the state.
However, not everyone feels that way. Proponents think the new tax will allow California-sourced lithium to compete on a more realistic scale. In their minds, fewer lithium imports means more state-sourced lithium, stimulating the local economy.
Another pain point the tax addresses is how to make lithium from Chinese suppliers more affordable. Thanks to the electric vehicle boom, more and more auto manufacturers are utilizing lithium-ion batteries, and that lithium needs to come from somewhere.
For instance, since 2020, GM has put a lot of effort toward EVs. Just last year, the company invested $71 million dollars into a brand new facility in Southern California. Of course, the new lithium tax will significantly affect this expansion, at least in the short term. In the long run, it will hopefully alleviate the cost of Chinese lithium.