In the world of life, there are small challenges and there are major, critical, existential challenges. That’s the story for humans, for businesses, and for industries. Limited cobalt supply is being pitched more and more as an existential problem for the electric vehicle revolution (and for Tesla in particular), but it’s really just another cog in the machine that needs to get moving.
The hottest trending hype about what will supposedly stop an electric vehicle revolution — and take down Tesla — has morphed over the years. “It will be X.” Well, no. “It will be Y.” Nope. “It will be Z.” Try again. As these other “death sentences” have been overcome, the naysayers have had to find new concerns to cling to. Because, you know, life is no fun if you aren’t worrying or casting doubt on positive forecasts of the future.
Now, the naysaying world of anti-EV and anti-Tesla commenters is all over cobalt. “There’s not enough of it! Where will people find it! Current suppliers commit human rights abuse!* The price is going to skyrocket! Game over for the EV market — and especially Tesla! (So long and thanks for all the tweets.)”
Not knowing how much cobalt supplies are a genuine point of concern and a bottleneck for much greater mass production of EV batteries, and thus EVs, I’ve spoken to EV battery experts several times in recent months to try to learn more. I didn’t want to jump to any conclusions or run with one quote just because my preference is for clean transport to take over the world quicker than not. I wanted to really understand this issue and understand if it’s a major point of risk. But after discussing with a handful of experts, the story seems to be quite different from what John Petersen claims.
Petersen is one of those fellows who has been claiming that the end of Tesla is nigh since the company’s stock price was approximately $30. To his credit, he admits this. Not ignoring that credit, he has been on the wrong side of Tesla and the wrong side of history in article after article for several years now. He continues to claim, however, that the fundamentals are against the Silicon Valley
startup giant. One of the most dire posts I’ve seen from him is linked above. He essentially lays it out like this:
♦ Cobalt demand will exceed supply by 42% in 2025 and 170% in 2030.
♦ “The time required to convert exploration success into a new mine is about 30 years.”
♦ That means prices will jack up a lot, and thus, prices of EVs won’t come down as people/companies expect.
♦ The grand summary from the author: this is “an existential threat to Tesla and the EV revolution.”
Sounds pretty bad, eh?
How could so many automakers make so many big EV plans with this issue glaring them in the face? I wanted to find out.
The first couple of people I talked to were a couple of market experts from Bloomberg New Energy Finance (BNEF) — Logan Goldie-Scot, Head of Energy Storage Analysis, and Michael Wilshire, Head of Strategy. The summary of their response seemed to be clear: The market will respond to the increased demand and scale up.
Yes, a quick rise in EV demand could result in a short-term cobalt crunch that could increase the price of cobalt — actually, that’s already happening. But high prices are a signal for more players to get in the game and for existing players to ramp up production. This is how markets grow and evolve.
Anyone who has followed the solar power industry for a decade or so may quickly jump to an analogy there. With the initial jump in demand for solar power (driven especially by a big boom in Germany), there was a silicon crunch. That led to a bump up in silicon, solar cell, and solar panel prices. Looking at a chart of those solar prices at that point in time might have led some people to think the price of solar panels would be going up for a while. Ha! The market responded — a lot of silicon production capacity came online. Actually, too much came online and solar prices plunged. While many experts claimed for a while that the drop in solar costs would then level off, they actually kept going down, down, down — a story for later today.
Today, a bump in cobalt prices may look daunting — threatening to the whole EV industry even. However, the experts at BNEF are confident the market will quickly solve the problem, boost production capacity, and bring prices back down. Here’s BNEF founder Michael Liebreich chatting with me about it a few weeks ago in Abu Dhabi (inside a Tesla Model X for the first leg of the 2018 EVRT):
Incidentally, earlier in the day, he was giving a presentation at The Mobility Conference, co-organized by CleanTechnica, in which he included the following commentary. Check out the relevant section of that presentation in the video below. (Update: the key graphs for battery pack prices, lithium-ion battery market demand, Chinese electric bus sales**, cobalt prices, lithium prices, and solar-grade silicon prices are now inserted below the video.)
“The price spike is the signal for investors. The investors pile in. The price comes back down. I guarantee it will be the same.”
Logan Goldie-Scot had more detail to share. He added that there was a known way to simply reduce the amount of cobalt in a battery with little to no downside. Here are some of Logan’s comments:
“Cobalt mining has historically been dependent on demand and production of copper (or, in some cases, nickel). I don’t know [Petersen’s] source for a lag of 30 years, but I would imagine it is is likely because post-exploration there was no economically feasible demand for the metal. If cobalt prices continue to rise as they have done, this is likely to change since it will be economical to mine it as a standalone resource.”
He added that this claim Petersen made that “the time required to convert exploration success into a new mine is about 30 years” appears to ignore the fact that cobalt is typically mined as a secondary metal — “otherwise, it would suggest that it applies to copper and nickel.” In other words, the claim of 30 years seems to be misleading since it’s about cobalt’s collection as a “hey, we found this as well” metal instead of as a core, targeted, high-demand metal. Going on:
“In terms of whether demand will exceed supply by 170%, I assume that is based on current levels of supply (or known and operational mines). It’s more likely that as prices are driven higher, other miners will look to bring new production capacity online to meet this demand. Alternatively, and unlike lithium, there will be greater substitution. We’re already seeing a push away from NMC 111 to chemistries with higher nickel content (and lower cobalt) such as NMC 811. If there really is a deficit in the market, this change will be accelerated. And finally, no — I don’t think this poses an existential threat. There is significant opportunity for new production to come online, changes in cathode chemistry and enhanced recycling that I think make it unlikely cobalt will act as a ceiling for EV adoption.”
The reference to NMC 111 and NMC 811 probably confuses many of you, but this is what I mentioned briefly above. In an NMC 111 battery, there’s 1 part nickel, 1 part manganese, 1 part cobalt oxide. In an NMC 811 battery, there are 8 parts nickel, 1 part manganese, 1 part cobalt oxide. See what’s going on there?
Meanwhile, in a conversation with someone from Tesla, it was noted that cobalt simply is not that significant to the composition of Tesla’s battery cells. Tesla mainly uses NCA batteries, which contain substantially less cobalt than the NMC batteries that most competitors use. Furthermore, Tesla reiterated that, in general, the trend in the material development world is towards higher-energy, lower-cobalt chemistries.
In summary, the market is likely to respond appropriately to any cobalt crunches, there are battery chemistries that largely get around the problem (whether NMC 111, Tesla’s own NCA preference, or coming battery chemistries), and the imminent death of the EV revolution seems nothing more than a mirage … yet again.
*A real problem, and one that companies like Tesla are trying to fix.
**Note the source. Updated stats with 2017 figures are now published here.