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Commodities: Will the Cobalt War Happen?

C’left for a shadow war. A latent conflict between the great powers for an ore which is already considered the most precious raw material of the next three decades. We can fight wars to have a monopoly. Governments can be overthrown to set up regimes favorable to this or that client and operator state. We can also generate immeasurable fortunes with such a trade which already regulates the fluctuations of prices and stock exchanges, the relations between rival powers and the poles to be set up for the monopoly of the markets.

But first, what is cobalt? Scientists tell us that cobalt is a metal particularly in demand by green technologies mobilized by the energy transition. 80% of cobalt is consumed to make lithium-ion batteries.
Science also tells us that cobalt has the particularity of having a high melting point and of retaining its resistance as well as its magnetic properties even when subjected to high temperatures. This makes it an essential element for many strategic fields, such as aerospace, defense, chemistry, etc. It is found, among other things, as a component of superalloys used in gas turbines and nuclear reactors, but also in radar magnets, missile guidance systems, marine propulsion systems, and even sensors.

This means that we are faced with a raw material of prime necessity for all the major world economies, especially in cutting-edge strategic areas.

We must also add to all these uses other important sectors which owe their development to cobalt. Its essential use in low-carbon technologies, also called green technologies (renewable energies and rechargeable batteries), because it is present in the magnets of wind turbines, in the cathodes of lithium-ion batteries and metal hydride batteries of nickel used in electric or hybrid vehicles, makes this mineral the sinews of tomorrow’s technology war.

In this sense, it should be known that the terrestrial resources of cobalt amount to 25 million tons. Most of these resources are located in what is known as the “Copper Belt”, a mining area that encompasses part of the province of Kantanga in the Democratic Republic of Congo (DRC). But, even being the world’s leading producer, with 100,000 tonnes in 2019, the DRC remains poor, suffers from great fragility and cannot, despite all the wealth at its disposal, develop and modernize its mining infrastructure to better manage its production, stocks and international trade.

Elsewhere in the world, several mining projects are on the verge of war. For example, in Russia, production reached 6,100 tonnes produced in 2019. In Australia, the mines enabled the production of 5,100 tonnes. In Cuba, 3,500 tons and in Morocco, we are already at 2,100 tons extracted in 2020. China, Japan and the United States are the main consumers of cobalt in the world. Since 2019, China has been ranked first in the world, with 80% of cobalt consumed there and used for the manufacture of batteries (USGS).

A rare and highly coveted mineral, cobalt has become the king of raw materials in the world, mainly because of what specialists call the “electric vehicle revolution”, as revealed in a report published by economists at McKinsey. This industry, which constitutes one of the great challenges of the industry of the future, risks suffering and being hampered by the lack of cobalt production capacity. It is in this perspective that we must understand the fears of analysts at UBS bank who indicate that “a world where the car fleet would be 100% electric, would require an increase of… 1.928% in global production of the blue metal. (+ 2.898% for lithium and + 655% for rare earths). A mission impossible unless entire regions are transformed into mining complexes with a very high environmental cost”.

What should also be remembered is that a decade ago, 98% of the cobalt extracted from the ground was a by-product of copper or nickel mines. Only the Bou-Azzer mine in Morocco has made cobalt its main product. It is moreover this specificity of cobalt which “reinforces the supply risk attached to it because the quantity of by-product generated by extractive activities depends closely on that of the main metals. As a result, the ability of the cobalt market to adapt to a sharp increase in demand is limited”, underlines the McKinsey report.

This explains the soaring prices for an increasingly rare and disputed mineral. As we remember, on March 21, 2018, the price of cobalt broke all records by reaching the exorbitant price of 95,000 dollars per ton on the London Metal Exchange (LME), the famous metal trading exchange. This is an increase of 300% compared to its levels in 2012, thus becoming the “blue gold” which will dethrone black gold in the coming decades.

Today, and especially with the pandemic, prices have fallen to stabilize between 28,000 and 35,000 dollars per ton. But China’s monopoly in refining poses a big problem for other major powers who do not look favorably on this Chinese hegemony in a first-rate geostrategic domain.

For example, in 2019, China only produced 2,000 tons of blue metal from its own mines, but it provided 80% of the refining of all world production. This control poses a serious problem for the American authorities, especially the Pentagon, for whom cobalt is a “strategic” product for the future of United States industries. It is in this sense that, since 2016, the US Department of Defense has made great efforts to push North American companies to inject funds into refining infrastructure in order to reduce their dependence on China.

#Commodities #Cobalt #War #Happen

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