Balancing market demand and sustainable, corporate responsibility: The true cost of not going cobalt-free
As regulatory and economic factors converge, the pressure on the coatings industry to commit to going cobalt-free is mounting. Catexel’s CEO, Paul Smith, considers the potential implications of recent market events for paint makers.
While the coatings industry continues to deliberate the optimal answer to the technical, commercial, health & safety and environmental challenges that its current reliance on cobalt driers presents, changing market conditions could soon see paint makers’ hands forced into finding an alternative. As global demand for the metal threatens to outstrip supply – hiking up prices and likely restricting availability – going cobalt-free is no longer a complex matter of, chiefly, corporate social responsibility concern. Economic factors are fast dictating that the cost of procuring ethically-sourced cobalt and its derivatives could make it a critical matter of operational viability for the ongoing recovery of the alkyd resins market.
As a secondary metal, the price of cobalt has historically been driven by the global demand for copper and, to a lesser extent, nickel. In the last year, however, its market price has increased by more than 140%. Rising from a base of around US$10-14/lb, to somewhere north of US$25/lb (see Figure.1). This represents one of the largest gains in the metals’ spectrum – even surpassing gold. What’s more, recent reports suggest that cobalt metal prices are likely to double again by the year end to >US$55/lb, with some experts even touting figures as high as US$70/lb.
A key factor contributing to this surge is cobalt’s use as a major component of lithium-ion batteries, which currently account for more than 40% of the metal’s total demand. These batteries are used in smartphones and other mobile devices, along with increasingly popular electric cars. Tesla is perhaps the best known electrical vehicle brand and it’s the company’s investment in its new ‘Gigafactory’ in Nevada that is driving predictions of a US$70/lb base cost.
This alone could feasibly lead to an impending supply-demand imbalance. With up to 90% of current supply already spoken for and lithium-ion batteries likely to increase demand by an extra 10ktpa in the next one-to-two years, the threat of only small additional market fluctuations impacting the availability of this strategic metal even further is real and imminent.
Coatings’ relative position as only a minor user of cobalt derivatives means that it is subject to the vagaries of pricing caused by these external influences and margins will eventually be squeezed. The impact of a five-fold increase in the metal’s value could lead to at least a doubling of price for cobalt salts and siccatives, after several years of general stability. When the potential for product availability restrictions is also factored in, the coatings industry faces some serious challenges.
Suddenly the exploration of alternative, more benign metal drying systems is far more attractive and wholly attainable. Existing and emerging technologies can, for the first time, be considered on a level playing field from a cost perspective.
Add to this the health & safety, environmental, regulatory and moral issues associated with the continued use of cobalt and there has to be renewed and increased investment in exploring proven, commercially acceptable alternatives. The European coatings industry as a collective has already adopted a precautionary approach and now self-classifies soluble cobalt salts in recognition of the risk to human health.
A switch away from cobalt driers, ahead of formal regulation, allows formulators to position themselves as socially responsible, forward-thinking organisations – a factor that is increasingly prevalent in consumer purchasing decisions. Since a significant proportion of the resin can be derived from sustainable, non-petroleum based feedstocks, alkyds have an inherent environmental USP. Furthermore, the broadening of alkyd makers’ offerings to encompass modified alkyds for water-based coatings (WB alkyds) and high solid systems (HS alkyds), keeps alkyds relevant and makes the case for substitution even stronger.
The search is admittedly not an easy one and there is no such thing as a simple ‘drop in’ cobalt-free solution. Nevertheless, there are a variety of classes of cobalt alternatives – based on manganese (Mn) and/or iron (Fe) catalysts – that are suitable for use in alkyd-based coatings, fully compatible with other materials, commercially acceptable and inherently more sustainable. With the recent increases in the price of cobalt these platforms are now, more likely than ever before, to be cost neutral.
A timely combination of the resurgence in the alkyd market, the emergence of next generation primary driers – and now the prospect of unprecedented price increases and potential product shortages hitting traditional cobalt systems – represents both an exciting opportunity and an immediate necessity for change to finally deliver a secure and cobalt-free future for coatings.
‘Cobalt: The New Gold Rush’, Gary C. Bizzo, Friday 19th May 2017, equities.com
‘Owner of $1Billion Cobalt Project says Rally is Far From Over’, Yuliya Fedorinova, Bloomberg Markets, 5th June 2017
‘Cobalt Set to Rise by 130%’, Palisade Research, 14th June 2017