What Is Driving the Cobalt Supply and Demand Imbalance?

The cobalt market is undergoing a significant transformation that will reshape industries dependent on this critical mineral. Current market surplus conditions are projected to reverse dramatically, creating a substantial deficit by the early 2030s. This shift will have profound implications for electric vehicle manufacturers and battery producers who rely heavily on cobalt for their technologies.

According to the latest Cobalt Institute report, we're witnessing a fundamental mismatch between supply and demand growth rates that will inevitably lead to market tightening. While demand is projected to grow at a robust 7% compound annual growth rate (CAGR), supply expansion is lagging at just 5% CAGR—creating a widening gap that will eventually eliminate the current surplus and push the market into deficit territory.

The primary force behind this imbalance is the accelerating adoption of electric vehicles worldwide, which is driving unprecedented demand for cobalt-containing batteries. At the same time, supply growth faces significant constraints due to geographic concentration, limited new discoveries, and complex geopolitical factors affecting major producing regions.

The Current State of the Cobalt Market

Record Demand Levels in 2024

Cobalt demand reached a historic milestone in 2024, exceeding 200,000 tonnes for the first time according to data from the Cobalt Institute. This represents a remarkable 14% year-on-year increase—the strongest annual growth since 2021. Despite this surge in consumption, the market remained in surplus territory, with excess supply of approximately 36,000 tonnes (equivalent to 15% of total demand). This surplus actually expanded from the 25,000 tonnes recorded in 2023.

The persistence of surplus conditions has created price pressures throughout the value chain, particularly affecting producers in the Democratic Republic of Congo (DRC), which remains the dominant source of global cobalt production.

Price Dynamics and Recent Market Interventions

In response to prolonged market surplus and depressed prices, the DRC implemented a dramatic four-month cobalt export suspension in early 2024. This intervention caused immediate market ripples, with cobalt prices surging approximately 60% to reach $16/lb following the announcement, according to Reuters reporting.

The ban highlighted the market's vulnerability to policy decisions from a single dominant producer. With the DRC responsible for approximately three-quarters of global cobalt output, future market conditions remain heavily dependent on the country's regulatory approach once the temporary ban expires.

"Securing access to essential critical minerals is at the top of the world's agenda, and cobalt is part of the solution to ensuring industrial growth, national security and a low-carbon economy," notes Dinah McLeod, Director General of the Cobalt Institute. "Urgent action is needed to build reliable and responsible cobalt value chains to secure cobalt supply."

How Is the EV Revolution Transforming Cobalt Demand?

Electric Vehicles Driving Future Demand

The electrification of transportation represents the single most significant factor in cobalt's demand outlook. Industry projections indicate cobalt demand will continue growing at approximately 7% CAGR in the coming years, potentially reaching 400,000 tonnes by the early 2030s.

The most dramatic shift involves the composition of end-use applications. Electric vehicles are projected to account for 57% of total cobalt demand by 2030, up significantly from 43% in 2024. This transformation reflects both the accelerating transition to electric mobility and the continued importance of cobalt in high-performance battery chemistries.

While some battery manufacturers are working to reduce cobalt content in lithium-ion batteries, the mineral remains crucial for achieving the energy density and performance characteristics required in premium electric vehicles. Current NMC (nickel-manganese-cobalt) batteries offer superior range and longevity compared to cobalt-free alternatives like LFP (lithium iron phosphate) batteries, maintaining demand despite efforts to minimize cobalt usage.

Diversification of Demand Sources

Despite EVs' growing dominance, cobalt demand maintains significant diversification across various industries:

• Consumer Electronics: Mobile phones, laptops, and other portable devices continue requiring cobalt-containing batteries
• Industrial Applications: Tools, medical devices, and energy storage systems
• Superalloys: Critical components for jet engines, gas turbines, and other high-temperature applications
• Catalysts: Used in petroleum refining and chemical synthesis
• Hard Materials: Cutting tools, mining equipment, and industrial machinery

These combined non-EV applications will still represent a substantial 43% of total cobalt demand by 2030, providing some buffer against potential volatility in the automotive sector.

Why Is Supply Growth Failing to Match Demand?

Geographic Concentration of Production

One of the most significant challenges facing cobalt supply is its extreme geographic concentration. The DRC currently accounts for approximately 76% of global production, creating vulnerability to political instability, regulatory changes, and infrastructure limitations in a single country.

While this concentration is expected to moderate somewhat over the coming years, with the DRC's market share projected to decrease to 65% by 2030, the market will remain highly dependent on Congolese production. Indonesia represents the primary alternative source, with its share of global output projected to increase from 12% to 22% by 2030, driven largely by nickel-cobalt projects.

The limited diversification of production sources stems partly from geological realities—cobalt deposits of sufficient grade and scale are rare outside these regions. Additionally, exploration activity has been constrained by prolonged periods of low cobalt prices, limiting investment in identifying new resources in politically stable jurisdictions.

Artisanal Mining Decline

A notable development affecting cobalt supply has been the significant decline in artisanal mining operations in the DRC. Once accounting for a substantial portion of the country's production, artisanal mining has reached an all-time low, contributing less than 2% of market supply in 2024.

This dramatic reduction stems from several factors:

• Prolonged low prices making small-scale operations economically unviable
• Increased industrial mining activity in traditional artisanal areas
• Formalization efforts by the DRC government
• Growing focus on responsible sourcing throughout the supply chain

While the decline in unregulated artisanal mining addresses some ethical concerns associated with cobalt production, it also removes a potentially flexible source of supply that could respond quickly to price signals. Industry experts do not expect artisanal production to regain its former market share, even as prices increase.

What Are the Supply Growth Projections?

Moderate Supply Expansion

Global cobalt supply is projected to grow at approximately 5% CAGR through the late 2020s, according to the Cobalt Institute's latest market analysis. This growth rate falls two percentage points below the anticipated demand growth of 7% CAGR, creating the fundamental imbalance that will eventually lead to market deficit.

The majority of supply growth is expected to come from:

1. Expansion of existing operations in the DRC
2. New nickel-cobalt projects in Indonesia
3. Modest contributions from projects in Australia, Canada, and other regions like the Halls Creek cobalt expansion
4. Limited increases in recycled cobalt from end-of-life batteries

When these sources are combined, they fail to match the accelerating demand curve, particularly as EV adoption accelerates in the late 2020s.

Production Challenges

Several structural challenges constrain the development of new cobalt production capacity:

• Limited New Mine Development: Few major cobalt projects are currently in planning stages
• Long Lead Times: New mines typically require 7-10 years from discovery to production
• ESG Considerations: Environmental and social governance concerns increase development costs and complexity
• By-Product Economics: Most cobalt is produced as a by-product of copper or nickel mining, making supply dependent on primary metal economics
• Investment Hesitation: Price volatility and uncertainty about long-term demand (given battery chemistry developments) complicate investment decisions

These challenges create significant inertia in the supply side of the market, preventing rapid expansion even when price signals indicate growing scarcity.

When Will the Cobalt Market Shift from Surplus to Deficit?

Timeline for Market Transformation

The current surplus conditions are expected to gradually diminish through the late 2020s as demand growth consistently outpaces supply additions. Based on current projections:

• 2024-2027: Declining but persistent surplus conditions
• 2028-2030: Market approaching equilibrium as surplus diminishes
• Early 2030s: Emergence of structural deficit conditions
• Beyond 2032: Widening deficit unless significant new production comes online

This timeline could accelerate if EV adoption exceeds current projections or if supply disruptions occur due to political instability in key producing regions.

Impact on Price Forecasts

Cobalt prices are likely to experience significant volatility throughout this transition period:

• Near-term (1-2 years): Prices heavily influenced by DRC export policies
• Medium-term (3-5 years): Gradual upward pressure as surplus diminishes
• Long-term (5+ years): Sustained higher prices as structural deficit emerges

These price dynamics may in turn accelerate technology shifts toward cobalt-reduced or cobalt-free battery chemistries. LFP (lithium iron phosphate) batteries have already gained significant market share in certain EV segments, particularly in China and for standard-range vehicles globally.

How Can Industry Address the Looming Deficit?

Investment Requirements

Preventing a significant market deficit will require immediate and substantial investment throughout the cobalt value chain:

• Exploration: Increased activity to identify and develop new cobalt resources
• Mine Development: Acceleration of projects currently in the planning stage
• Processing Capacity: Expansion of refining capabilities outside China
• Recycling Infrastructure: Development of commercial-scale facilities to recover cobalt from end-of-life batteries

The capital requirements for these investments are substantial, potentially exceeding $15-20 billion over the next decade. Without this level of commitment, the projected deficit will likely materialize as anticipated.

Responsible Sourcing Initiatives

The formalization of artisanal mining represents another potential avenue for increasing cobalt supply from existing operations. While this sector has declined significantly, it could be revitalized through structured programs that address safety, environmental impact, and human rights concerns.

"The challenge isn't to eliminate [artisanal mining], but to make it fair, safe and free from human rights issues," emphasizes Dinah McLeod of the Cobalt Institute.

Industry collaboration will be essential to establish ethical supply chains that can both increase production and meet growing consumer and regulatory demands for responsibly sourced materials.

What Are the Implications for Battery Technology?

Potential Technology Shifts

The looming cobalt supply and demand deficit and associated price pressures may accelerate several technological developments:

• Low-Cobalt Cathodes: Further reduction in cobalt content of NMC batteries
• Cobalt-Free Alternatives: Expanded adoption of LFP and other chemistries that eliminate cobalt
• Solid-State Batteries: Development of next-generation technologies with different material requirements
• Alternative Chemistries: Research into sodium-ion, aluminum-ion, and other novel approaches

However, these shifts face their own challenges. Cobalt-containing batteries currently offer superior energy density, crucial for high-performance applications like long-range EVs. Complete substitution remains challenging in the near term for premium vehicle segments.

Strategic Stockpiling

As awareness of potential supply constraints grows, both governments and industrial users may implement strategic stockpiling programs:

• National Security Reserves: Countries may classify cobalt as a critical minerals energy transition element requiring domestic reserves
• Corporate Inventory Management: Battery and EV manufacturers may increase raw material inventories
• Long-Term Supply Agreements: Vertical integration between miners and end-users to secure supply

These stockpiling activities could further tighten market conditions, potentially accelerating the transition from surplus to deficit.

FAQ: Cobalt Market Dynamics

What factors are driving increased cobalt demand?

The primary driver is the rapid expansion of the electric vehicle market, with EVs expected to account for 57% of cobalt demand by 2030. Secondary factors include continued growth in consumer electronics and industrial applications requiring cobalt-containing components. The mineral's unique properties make it particularly valuable for high-energy-density batteries and high-temperature applications like superalloys.

How will the DRC export ban affect long-term market conditions?

While the ban has caused a short-term price spike, its long-term impact depends on whether the DRC extends the restrictions or implements new policies to manage exports. The ban highlights the market's vulnerability to supply disruptions from a single dominant producer and may accelerate efforts to develop alternative sources. However, given the DRC's overwhelming market share, any sustained export restrictions would significantly tighten global supply and accelerate the timeline for market deficit.

Are there viable alternatives to cobalt in batteries?

Several battery manufacturers are developing reduced-cobalt or cobalt-free alternatives, including lithium iron phosphate (LFP) batteries which have gained significant market share, particularly in China and for standard-range vehicles. However, cobalt-containing batteries currently offer superior energy density for high-performance applications, making complete substitution challenging in the near term, particularly for premium long-range electric vehicles where range and performance remain paramount considerations.

Conclusion: Preparing for a Transformed Cobalt Market

The cobalt market is heading toward a fundamental shift from surplus to deficit conditions by the early 2030s. This transformation will be driven by accelerating demand from electric vehicles outpacing more modest supply growth. The projected 7% annual demand growth compared to 5% supply growth creates a widening gap that will eventually eliminate the current surplus.

For industries dependent on cobalt, particularly battery manufacturers and automakers, this forecast signals the need for proactive supply chain strategies. These may include securing long-term supply agreements, investing in new production capacity, supporting responsible sourcing initiatives, and developing technologies that reduce cobalt intensity.

The EV revolution impact on cobalt market dynamics requires urgent action across multiple fronts:

• Supply Chain Diversification: Reducing dependence on single sources
• Technological Innovation: Developing more efficient use of cobalt in batteries
• Recycling Investment: Creating closed-loop systems for cobalt recovery
• Responsible Production: Supporting ethical mining practices in key producing regions

As Dinah McLeod of the Cobalt Institute emphasizes: "Urgent action is needed to build reliable and responsible cobalt value chains to secure cobalt supply." The coming decade will determine whether the industry can successfully navigate the transition from today's surplus conditions to the projected deficit, with significant implications for the clean energy transition and electrification of transportation worldwide.

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