Electric cars have made this once obscure metal the hottest commodity of 2017

An unlikely source of financial returns.
An unlikely source of financial returns.
Image: Reuters/James Akena
We may earn a commission from links on this page.

2017 belonged to cobalt.

The silvery-blue metal, which is mined as a by-product of copper and nickel, is a crucial element in the lithium-ion batteries that power everything from electric cars to Apple products. This year, it has completely outshone the rest of the commodities market. The price of cobalt surged 120%, while the Bloomberg commodity index fell 4%.

The market for cobalt has increased from about $4 billion last year to about $8 billion, according to Bloomberg.  Traders and automakers are betting that consumers will increasingly switch to electric vehicles as several countries around the world try to drastically cut down carbon emissions by banning gas and diesel cars. By 2026, demand for lithium-ion batteries is forecast to grow by six or seven times the current amount, according to Benchmark Mineral Intelligence. These expectations have helped nearly all the raw materials used as components in the batteries, such as lithium and nickel, to outperform the rest of the commodities market. These materials need to be available now to meet demand for the final products, such cars, in just a few years.

The metal’s popularity is inherently problematic. Traders suspect that there won’t be enough supply to meet demand because two-thirds of the world’s cobalt is in the Democratic Republic of Congo. Political instability and reports of child labor being used to mine the metal have seen some mining companies leave the country and try to increase the supply mined in other parts of the world, such as Canada and Australia.

As cobalt’s price has more than doubled from the start of the year to $72,000 per metric ton, some car companies are trying cut deals for a long-term supply of the metal at favorable prices. Volkswagen, which wants to be the world’s biggest producer of electric cars within a decade, found its efforts to get cheap cobalt rejected.

Next year, prices will keep on rising, though potentially at a slower pace, said Casper Rawles, an analyst at Benchmark. With little standing in the way of cobalt’s upward march, the pace of gains might be determined by Glencore, which controversially brought two large mines in the Congo earlier this year. Still, any delays that Glencore encounters getting the cobalt from these mines into the market would cause big price increases, Rawles said.