Cobalt is like gold, but demands a sustainable global approach

Cobalt is an important component of the batteries that will drive electric cars in the future. There is currently a fierce struggle for access to cobalt, both economically and politically. This fight leads to abuse and risks slowing down environmentally friendly developments. Cobalt trade needs a sustainable global approach that will benefit the global economy, our environment and all concerned.

Green cars

According to the latest American research, the polar icecaps are melting faster than previously thought. Water levels threaten to rise more quickly as a result and Western European coastlines are in danger. Perhaps this ominous message will be the distress call that finally causes Europe to wake up. The uptake of green technological solutions has been slow, despite the fine political words and widespread good intentions. Greening Europe’s vehicle fleet is a key element of this, given that cars account for a substantial proportion of worldwide CO2 emissions (roughly a quarter according to the International Energy Agency). Electric cars promise a great deal, but better batteries are needed, posing a challenge in terms not only of technological development, but also of the raw materials these batteries require. Cobalt plays a vital role but is unfortunately in short supply. It is only found in a few locations around the planet and is, moreover, controlled by a limited number of players.

Scarcity as an economic law

Scarcity is one of the most important economic principles. When something is scarce, economists call for it to be used with maximum efficiency. Optimum deployment of factors of production like labour and capital maximise output and prosperity in our economy. Markets ensure a balance between supply and demand and correct price-setting. At least they do when they are genuinely free.

In cobalt’s case there is an issue in this regard on both the demand and the supply side. Global stocks of cobalt are in the hands of a few countries and are effectively controlled by a limited number of companies. What’s more, it is not being extracted efficiently. Mines in developing countries in particular struggle to meet their production targets. This situation threatens to cause problems. On the one hand, suppliers are in a strong position to drive up the price, while on the other, selective access to the necessary cobalt creates positions of power throughout the economic network centring on the mineral’s extraction and processing.

These supply-side difficulties are paralleled by sharply increasing demand, with the automotive industry in particular firmly backing the move towards electric cars. Even before vehicles like this make their real breakthrough, many car makers have been attempting to secure access to cobalt via long-term contracts. After all, without cobalt, the future production of electric cars is jeopardised. Scope for hedging on the financial market against fluctuations in the cobalt price are, moreover, limited.
And scarcity does indeed have a price: cobalt prices have been rising in recent years and actually doubled in 2017 alone. The price of cobalt is partially influenced by the market performance of other metals, as cobalt is often a by-product of copper and nickel mining. Consequently, its market price depends on trends in the extraction of those two metals.

We also detect a considerable degree of volatility, indicative of speculation. In addition to demand from industry, it is clear that a lot of players are active in the market for purely financial reasons. Everyone seems convinced right now that there is a structural problem with supply and that demand for cobalt can only increase.

Geopolitical risks

Cobalt is only available from a few locations in the world. The biggest stocks are found, however, in a single country, namely Congo (see figure). History teaches that Congo’s wealth of natural resources has already sparked a number of bloody conflicts. Cobalt is the object not only of a domestic power struggle but also of international tussling for access to strategic raw materials. China, for instance, has been actively involved in the continent of Africa over the past decade with a view to securing its access to energy and raw materials. The Congo (extraction)–China (refining) axis is crucial right now to the worldwide cobalt trade, which risks clashing with historical economic interests in the region. What seems at first sight like a metaphorical goldmine for Congolese society threatens to become the stakes in a ruthless international power struggle.

Figure - Worldwide production and estimated reserves of cobalt (in % of the total)

Source: USGS Mineral Resources Program (2018)

Unfortunately, the weakened Congolese government is not in a position to apply the same strategy as other commodity-rich nations. Countries like Russia, China and Argentina use export restrictions to defend their strategic reserves of commodities such as uranium, chromium, graphite and hence also cobalt. It seems unlikely, therefore, that ordinary Congolese people will benefit from their country’s rich cobalt stocks, the benefits of which will flow instead to international investors and the like. Worse still, there is ample evidence that exploitation and child labour are firmly embedded in Congo’s mines.

Cobalt: what’s next?

Intensifying demand for cobalt for industrial use is also attracting some positive reactions. There is growing attention, for instance for the recycling of cobalt from old mobile phones. ‘Urban mining’ techniques are being applied to recycle the commodity. Recycling is in full swing, which many analysts believe could even exert downward pressure on the cobalt price. This will certainly be the case in the longer term, as electric cars too begin to be recycled. A fine example of the circular economy might well arise in this respect.

The present scarcity is also driving a quest for alternative technologies. The cobalt shortage is underpinning an ongoing process of innovation. Cobalt-free batteries appear technologically difficult in the short term, but in the longer run, possible alternatives will be developed, which could fundamentally alter the market once again. Many countries (the EU, US and China among them) have put research into new battery technology at the top of their strategic research agenda.

The current difficult market conditions, strategic power plays (and possible abuses) and uncertainty about the future highlight the need for an international, sustainable approach based not only on an economic but also an ecological and humanitarian perspective. An approach of this kind could help in the breakthrough of environmentally friendly technology. It would also ensure the stability of industrial production as we wait for alternative battery technologies to emerge, not to mention considerably reducing the scope for abuses. There is a shared responsibility here for international institutions, policy-makers and the business world. Cobalt may be worth (more than) its weight in gold, but the whole world ought to benefit from its riches.


Any opinion expressed in this KBC Economic Opinions represents the personal opinion by the author(s). Neither the degree to which the hypotheses, risks and forecasts contained in this report reflect market expectations, nor their effective chances of realisation can be guaranteed. Any forecasts are indicative. The information contained in this publication is general in nature and for information purposes only. It may not be considered as investment advice. Sustainability is part of the overall business strategy of KBC Group NV (see We take this strategy into account when choosing topics for our publications, but a thorough analysis of economic and financial developments requires discussing a wider variety of topics. This publication cannot be considered as ‘investment research’ as described in the law and regulations concerning the markets for financial instruments. Any transfer, distribution or reproduction in any form or means of information is prohibited without the express prior written consent of KBC Group NV. KBC cannot be held responsible for the accuracy or completeness of this information.

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