EV-killer cobalt has backfired, Wile E. Coyote-style

LISTENING to the various “yes, but” theoretical challenges raised to the energy transition over the years has at times felt like watching Road Runner cartoons.

Time and again, portentous and alarming arguments have been dragged out — like the cartoons’ antagonist Wile E. Coyote, hauling along an Acme Rocket-Sled to — only to backfire spectacularly, leaving the proponents frazzled. Meanwhile the energy transition, undaunted, has sped onward.

The latest EV-killer to has been cobalt. The Democratic Republic of Congo, which produces about three-quarters of the bluish-silver metal used in lithium-ion batteries, has to help mop up a glut that’s caused prices to slump to their lowest levels in decades.

It wasn’t meant to be this way. At pretty much any point over the past decade, wise heads were warning that a looming shortage might stop the rise of electric vehicles in its tracks.

“A Cobalt Crisis Could Put the Brakes on Electric Car Sales,” in 2020. Prices might a metric ton, an International Monetary Fund study cautioned the following year, about 30 times the current price. There simply isn’t enough cobalt in global mine reserves, and we may be better off reinventing the internal combustion engine instead of switching to electric cars, according to a for the Geological Survey of Finland.

How did all those predictions turn out so wrong? If you’d paid attention to the , you’d have known the answer long ago.

Permanent shortages of raw materials are almost unheard of in human history. That’s a consequence of the laws of supply and demand: When demand for a material runs too far ahead of supply, prices rise. Consumers respond by using less, while producers rush to get more of it to market. The result is a price slump and, typically, a return to equilibrium.

That’s precisely what we’ve seen in the cobalt market over the past decade. The metal helps pack extra energy into a lithium-ion battery, so seemed critical in the early years of EVs when manufacturers were struggling to develop vehicles which could travel for more than a few hundred kilometers on a charge.

The shortage of global supplies was a concern from the outset, though. By the middle of the 2010s, cell-makers were working to shift from the NMC 111 chemistry — which used equal quantities of nickel, manganese, and cobalt — to NMC 811 and NMC 955, which were respectively 10% and 5% cobalt.

Miners, meanwhile, were finding far more of it than anyone expected. In Indonesia, weathered nickel-rich rock contains just the right proportion of cobalt for an NMC battery. Now a country whose production was negligible has become the world’s second-largest producer. In Congo, hunger for another energy-transition metal — copper — caused cobalt output to more than double in five years, thanks to the way local ores contain a mixture of the two elements.

The coup de grâce came from China’s lithium-ion battery giants Contemporary Amperex Technology Co. and BYD Co. Rather than scrimping on your use of cobalt with NMC 811 and NMC 955 batteries, why not give up on it altogether? The rival lithium-iron-phosphate or LFP cathode chemistry, long overlooked as a technology more suited to golf carts than performance cars, has improved by leaps and bounds — driven by the necessity of innovation in the face of cobalt’s tight market.

These days, LFP batteries have energy densities that match the best NMC cathodes from the early 2020s, cost about half as much, and are installed in nearly 50% of Chinese EVs. Premium overseas carmakers are joining the club: Audi AG, BMW AG, Mercedes-Benz Group AG, and Tesla, Inc. are all now selling or developing LFP-based models.

The result of all this is a bust, even as EVs boom. “Cobalt is far less important than imagined,” a spokesman for China’s CMOC Group Ltd., the , told Bloomberg News last year. “EV batteries will never return to the era that relies on cobalt.”

Demand for cobalt sulfate, the compound used in batteries, has already nearly topped out. Having doubled to about 160,000 metric tons a year since 2019, it will tick up to just over 180,000 tons by 2027, where it will plateau for the foreseeable future, according to forecasts out to 2035 by BloombergNEF. That’s in marked contrast to other battery metals such as lithium, nickel, and manganese, which are expected to experience ongoing growth.

Cobalt won’t go away entirely — but in future it will increasingly occupy a niche position at the most performance-oriented end of the EV market. There’s a rich irony in this. For years, people have warned that this one metal would kill off electric cars and keep the world hooked on gasoline. To the extent that cobalt still has a future now, it’s because that prediction turned out to be spectacularly wrong.

BLOOMBERG OPINION