IS IT CRUNCH TIME FOR COBALT IN COATINGS?

As the global demand for cobalt shows no sign of slowing down, Catexel’s CEO Paul Smith revisits the implications for the coatings industry.

In the summer of 20171, I wrote about growing concerns surrounding the availability and pricing of cobalt, and the potential impact on the coatings and composites industry. As a relatively minor user of cobalt derivatives, the increasing global competition for this sought-after resource left the coatings industry exposed to price fluctuations and pressure on profit margins. Add into the mix the health concerns surrounding cobalt salts and the ethical issues of the mining of cobalt in the Democratic Republic of Congo (DRC), and the coatings industry was faced with growing pressure to commit to going cobalt-free.

Six months later and the price of cobalt is hitting the headlines again with it reaching a ten year high of $35.61/lb2. The forecasts are predicting the demand for cobalt will continue to rise in 2018, adding more stress to the balance of global supply and demand.

So, what are the factors at play creating the latest surge in the price of cobalt?

Supply chain restructuring

With its high energy density and low thermal conductivity, cobalt is an important component of lithium-ion batteries and in a report from June 2017, Conaccord Genuity forecast that by 2025, 73% of cobalt would be used by the global battery market. Powered by lithium-ion batteries, the electric vehicle market is booming and in order to meet production requirements, vehicle manufacturers are looking for more efficient, reliable and cost-effective methods to guarantee their supply of cobalt.

The result has been electric vehicle manufacturers such as Mercedes Benz, Volvo, BMW, Volkswagen joining TESLA in seeking to arrange long term supply arrangements for cobalt directly with the miners and refiners, missing out the traditional trading houses. This has changed the supply landscape of cobalt forever and it’s at the expense of smaller, low volume cobalt users like the coatings and composites sector. In fact, the total use in metal soaps is now less than 3% of global demand for cobalt.

The immediate reaction to these shifts in the supply framework has been a price hike of 50% above its mid-December 2017 peak, climbing to over $35/lb and it is forecast to climb even higher as I predicted back in July 2017.

Sourcing an alternative

Considerations around ethical investments permeate the entire global economy and cobalt mining is just one of a number of cases where caution is recommended. A recent paper4 from London-based Hermes Investment, “Modern Slavery: the true cost of mining cobalt” sets out a comprehensive assessment of the current market conditions, supply chains and demand drivers highlighting the complexities involved in satisfying the global demand for cobalt.

Opportunities to fund and open new US mine developments continue to surface but realistically it could be more than 5 years before we start to feel any benefit, by which time, regulatory and other concerns around cobalt use in coatings and composites will have changed the demand landscape all over again.

A cobalt-free future for coatings?

For the coatings industry, a combination of regulatory concerns, limited cobalt availability and rising prices will underpin fundamental changes in the adoption of novel siccative solutions. The simultaneous resurgence of the sustainably sourced alkyd resins market means we can at last look forward to satisfying growing consumer demand for sustainable products without compromising performance.

Catexel remains committed to delivering cobalt alternatives for a more sustainable and cobalt-free future for the coatings and composite markets.

References:
  1. http://www.european-coatings.com/Raw-materials-technologies/Raw-materials/Coatings-pigments/The-true-cost-of-not-going-cobalt-free
  2. Cruz Cobalt: Cobalt Price per Pound reaches a New 10-year HIGH of $35.61! Multiple Cobalt Work Programs are Now Underway in North America!

CUZ:TSX.v | BKTPF:USA | A2DMG8:Germany; Please see the link to Cruz Cobalt Corp’s fresh video content: http://www.investmentpitch.com/video/0_1pkqpo2u/Whats-Behind-the-Global-Demand-for-Cobalt

  1. https://investingnews.com/daily/resource-investing/critical-metals-investing/cobalt-investing/cobalt-forecast/
  2. https://www.hermes-investment.com/ukw/blog/perspective/modern-slavery-true-cost-cobalt-mining/
  3. https://www.ft.com/content/95ed34f0-10da-11e8-940e-08320fc2a277

 

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