Indonesia emerges as a cobalt powerhouse amid surge in demand

CRITICAL MINERALS | Nation now world’s second-largest cobalt supplier

BY HENRY LAZENBY

Demand for cobalt is set to more than double by 2030 to 388,000 tonnes as the electric vehicle (EV) sector shifts into overdrive, says a new Benchmark Mineral Intelligence report.

The consultancy forecasts compound yearly cobalt demand growth of 10% over the weak figures in 2022, according to a May 10 report that was commissioned by the Istanbul-based Cobalt Institute.

“The industry is optimistic the cobalt market will continue to grow in the coming years, driven by the success of cobalt’s use in superalloys and hard metals, and particularly in EVs,” the institute’s interim director general, Caroline Braibant, said in an email to The Northern Miner Cobalt-containing batteries are essential for EV batteries’ safety, performance and stability — a factor that will continue to define consumer preferences in Europe and North America, she added.

According to the report, the EV sector will account for 89% of demand growth for cobalt by the end of the decade, followed by energy storage at 3% and super alloys at 2%. The EV sector accounted for 40% of total metal demand in 2022, and is forecast to swell to 66% by 2030.

Despite the rising share of lithium-iron-phosphate (LFP) battery chemistries, cobalt-containing cathode chemistries such as nickel-cobalt-manganese (NCM), nickel-cobalt-aluminum oxide (NCA) and lithium-cobalt oxide (LCO) will be the preferred technology for battery applications — accounting for 59% of total cathode demand in 2030, Benchmark suggests.

“NCM chemistries for EV applications will remain the major driver, shifting to higher nickel and lower cobalt intensities over time. LFP’s share will rise further rela- tive to 2022, reaching a 39% share in 2030. However, we do not anticipate a widespread switch away from cobalt-containing chemistries,” reads the report.

All this demand will require more supply. According to Benchmark, global cobalt supply, both primary and secondary, will exceed 200,000 tonnes this year, and only amount to 318,000 tonnes by 2030, meaning the market will be in deficit by then.

The Democratic Republic of Congo (DRC) continues to dominate as the world’s primary cobalt source, accounting for 73% of the mined cobalt supply in 2022. It is expected to remain the dominant producer, although this share will fall to 57% by 2030.

Braibant says the August 2022 U.S. Inflation Reduction Act (IRA) is likely to reshape the global cobalt supply chain. Neither of the major suppliers — the DRC or Indonesia — are IRA-compliant. Compliant jurisdictions are expected to benefit from the IRA’s proposed financial and tax incentives.

Indonesia rising Notably, Benchmark flags Indonesia as stepping up to the supply challenge. Indonesia is the second-largest supplier by some margin and growing quickly.

From 2022 to 2030, Indonesia has the potential to increase cobalt supply by 10 times, compared to the DRC’s output rising by two-thirds, and could account for 37% of the potential mined supply growth from 2022-30, according to Benchmark.

Indonesia became the second largest cobalt producer last year, capturing 5% of the global market share and bypassing Australia. It produced 9,500 tonnes in 2022.

Despite not producing any mixed hydroxide precipitate (MHP) before 2021, the quick rollout of new high-pressure acid leach (HPAL) nickel production capacity in Indonesia has meant that cobalt in MHP is quickly becoming a crucial part of the global market. Benchmark forecasts 93% of Indonesia’s potential cobalt growth to 2030 will come from MHP, with the remainder from matte — an artificial nickel-iron sulphide containing 25%-45% nickel that has turned the traditional nickel market on its head.

Investment in Indonesian HPAL capacity is mostly Chinese, although more Western companies are getting involved.

For now, Benchmark expects cobalt supplies will continue to outpace demand, at least until the mid2020s. The average 2022 price for cobalt in Europe was US$31 per lb., peaking at US$40 per lb. As of late March, cobalt was trading at about US$18 per lb., with forecasts suggesting that price level should persist through the rest of the year.

The price outlook changes to a more optimistic tone from the mid to late 2020s, Benchmark forecasts, underpinned by an emerging structural deficit as supply growth slows and demand grows quicker.

“With additional supply required to fill the widening forecast deficit, cobalt prices will increase to incentivize investment,” Benchmark says.

The agency also flags a divergent pricing mechanism for intermediate battery chemicals and the actual metals market. The latter was traditionally used for trading in all stages of the cobalt value chain.

“With chemical and metal market fundamentals diverging over the last year, given the relatively tight metal market and the intermediate oversupply, the metal price has often failed to represent the overall market balance. As such, alternative pricing methods are emerging in the hydroxide market, which avoid referencing the metal price,” the report says. TNM land before Teck was able to separate its metallurgical coal and metals businesses so it could try to buy the whole company for less than the sum of its parts. Teck needs to soundly execute its plan to simplify the division of its assets, Karafotias said.

“If all we see is a revised separation post, it’s going to be difficult to convince shareholders there is additional value,” he said. “They need to put more on the table.”

A confidential bid this month for Teck’s metallurgical coal assets by a Canadian group led by Pierre Lassonde, a founder of Franco-Nevada (TSX: FNV; NYSE: FNV) and a former president of Newmont, has added a new dimension to

Glencore’s pursuit, Karafotias said. But the panel agreed a main player will be regulators after Canada boosted its critical minerals policy and stiffened its foreign investment regulations last year.

“The thing that you have to recognize with respect to the Canadian critical minerals policy, it is a substantial expansion of the review authority of the Industry Ministry to look at mining transactions,” McKoen said. “When you start flipping through all the minerals that are on there, it starts to become a question of what’s not on there.”

Previously, federal review only kicked in for deals greater than $1.9 billion or down to $512 million depending on the foreign entity’s World Trade Organization status and treaty relationship with Can- ada, he said.

“For a lot of acquisitions in the exploration mining space, they would fall below those thresholds,” he said. “Now with the critical minerals list, we have an issue, and that is they’ve said everything on that list, if it has a foreign acquisition component, then it’s subject to a nebulous review of some sort.”

Divestments

In November, Canada ordered three Chinese companies to divest holdings from Canadian companies even though one’s main project is in Chile and others concerned non-controlling stakes. However, before the new strategy was adopted in October, China’s Zijin Mining was allowed to buy Canada’s Neo Lithium, which has a proj-