Executive Summary
- According to IEA, the estimated global demand for cobalt is increasing under all three policy scenarios, primarily driven by the expanding EV market.
- Supply for cobalt is highly concentrated in the DRC, presenting a significant challenge.
- China faces substantial supply chain risks due to its heavy reliance on the DRC’s cobalt supply, a situation that underscores the need for strategic planning in securing stable cobalt resources.
Background
The strategic importance of critical minerals in global economic and security dynamics cannot be overstated. Cobalt, in particular, has emerged as a mineral of significant interest due to its vital role in the manufacturing of batteries for electric vehicles (EVs) and renewable energy storage systems. China’s growing reliance on cobalt, particularly from the Democratic Republic of Congo (DRC), necessitates a thorough analysis of its position and strategy regarding this critical resource.
Increasing Global Demand for Cobalt
The global demand for cobalt is expected to surge considerably in the coming years, primarily driven by the global push towards decarbonization and the burgeoning EV market. As depicted in Figure 1, projections indicate a consistent increase in cobalt demand from 2025 through 2050 across all three policy scenarios. In the pursuit of achieving the net-zero emissions target by 2050, it is anticipated that the demand for cobalt will exceed 500 kilotons.
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The expansion of the EV market is the main catalyst for the growing global demand for cobalt. According to forecasts by the IEA, the EV sector alone could account for over 40% of cobalt demand by 2030. This trend is further illustrated in Figure 2, where under the majority of technological scenarios, there is a noticeable uptick in the demand for cobalt within the EV industry in the context of the stated policies. (Note: In the scenario of constrained nickel supply, the demand for cobalt is limited due to their interconnected usage in the production of EV battery.)
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Significance of Cobalt in China’s Decarbonization Initiatives
Cobalt is integral to China’s decarbonization strategy, as the nation seeks to reduce its reliance on conventional fuels and transition towards electric-powered transportation. As indicated in Figure 3, electricity is expected to cover around 55% of all energy needs in 2060. Expanding its EV market, a cornerstone in this strategy, hinges significantly on the availability and use of cobalt.
Figure 3. Change in Final Energy Demand by Fuel and Sector in China, in the Announced Pledges Scenario, 2020-2060
Risks and Challenges for China
China’s reliance on cobalt presents notable supply chain risks, primarily stemming from geopolitical and market dependencies. Cobalt supply is highly concentrated geographically, with a significant portion of the world’s production emanating from a limited number of countries, notably the DRC. As shown in Figure 4, the DRC accounts for 73% of mined cobalt supply in 2022.
Figure 4. Share of Mined Cobalt Supply in 2022
This concentration of supply in a politically volatile region like the DRC makes the supply vulnerable to disruptions, leading to sudden price spikes. Furthermore, the rapidly expanding EV industry and varying market speculations contribute to this instability, making cobalt prices particularly susceptible to significant and unpredictable fluctuations. Figure 5 reflects the historical price of cobalt during the past 10 years.
Figure 5. Cobalt Prices during the Past 10 Years
In addition, China relies almost entirely on the DRC for mined cobalt. As indicated in Figure 6, China takes up 62.5% of total cobalt imports worldwide. The competitive landscape is intensifying, with other major economies like the United States, Japan, and members of the European Union also vying for stable cobalt supplies. China needs to actively seek ways to diversify its cobalt supply portfolio.
Figure 6. Distribution of Cobalt Imports Worldwide in 2021, by country
Policy Suggestions for China
To bolster the security of its cobalt supply chain, China should implement a multifaceted approach encompassing enhanced multilateral cooperation, exploration of new supply sources, and robust geopolitical risk management strategies. Strengthening international partnerships is key to diversifying supply chains and reducing geopolitical vulnerabilities, particularly through collaborations with countries in mineral-rich regions like sub-Saharan Africa. Concurrently, developing comprehensive risk management plans, including alternative supply routes and contingency measures, is crucial for ensuring a stable and secure supply of cobalt amidst the dynamic global demand and supply landscape.
