China Has a Secret Weapon in the Race to Dominate Electric Cars
Over the past two years, cobalt has emerged as one of the hottest commodities of the electric-vehicle revolution. The silvery-blue metal, an important component in lithium-ion batteries, has more than doubled in price, making carmakers and tech giants fret about securing their future needs.
The focus on the metal has turned a spotlight on the obscure supply chain that takes cobalt produced in mines in the Democratic Republic of Congo, Canada or Morocco, and ultimately delivers cobalt-containing batteries to companies from Samsung Electronics Co. to Volkswagen AG. That supply chain is dominated by Chinese companies.
Many of the leading companies that mine cobalt, such as Glencore Plc and Vale SA, are well known. So too, at the other end of the spectrum, are the tech companies and carmakers that buy batteries.
In between them sit companies that refine cobalt ore to make chemicals like cobalt sulphate; companies that combine these chemicals with other metals like nickel and manganese to make the cathode element of a lithium-ion battery; and companies that assemble the cathodes with the other components to make battery cells, and ultimately batteries.
While there’s little cobalt mining in China itself (1 percent of the world’s total output in 2017), Chinese companies have snapped up cobalt mines abroad in recent years, particularly in the Democratic Republic of Congo, the largest source of the metal.
Cobalt Origins
Congo
68%
Rest of
World
32%
Rest of World
32%
Congo
68%
Congo
68%
Cuba
4%
Philippines
5%
Australia
3%
Russia
4%
P.N.G.
3%
Canada
3%
Madagascar
3%
Moroc.
1%
S.A.
1%
New Caledonia
2%
Zam.
1%
China
1%
One key concern for cobalt buyers is that more than half of the world’s supply of the metal originates from a country where there has never been a peaceful transition of power. Reports of child labor at some small-scale mines in Congo has prompted some end users to trace the supply chain for the cobalt in the batteries they buy.
Eight of the 14 largest cobalt miners in Congo are now Chinese-owned, accounting for almost half of the country’s output.
Mining Stronghold
2km
2mi
29%
21%
9%
Mutanda
Tenke Fungurume
Tilwezembe
Mutanda Mining
Glencore, Switzerland
Other D.R.C.
including artisanal mining
Tenke Fungurume
CMOC, China
8%
6%
5%
Luiswishi
Ruashi
Etoile
Congo Dongfang Mining
Zhejiang Huayou Cobalt, China
Ruashi Mining
Jinchuan Group, China
Etoile/Usoke
Shalina Resources/Chemaf, U.A.E.
4%
4%
4%
Mukondo
Kamoya
Diverse
Boss Mining
ERG, Luxembourg
Kamoya
Wanbao Mining Ltd. (Comika), China
Metal Mines
Nanjing Hanrui Cobalt, China
3%
3%
3%
Diverse
Big Hill
Kisanfu
Big Hill
GTL, Belgium/D.R.C.
Somika
Somika SPRL, D.R.C.
MJM
Jiana Energy, China
2%
1%
N/A
Kalumbwe-Myunga
DIMA
Kamoto
MKM
CREC, China
Sicomines
CREC, China
Glencore
Katanga Mining/KCC, Switzerland
Mutanda Mining
29%
Tenke Fungurume
21%
Other
9%
CDM
8%
Ruashi Mining
6%
Etoile/Usoke
5%
BOSS Mining
4%
Kamoya
4%
Metal Mines
4%
Big Hill
3%
Somika
3%
MJM
3%
MKM mines
2%
Sicomines
1%
Mutanda Mining
29%
Tenke Fungurume
21%
Other
9%
CDM
8%
Ruashi Mining
6%
Etoile/Usoke
5%
BOSS Mining
4%
Kamoya
4%
Metal Mines
4%
Big Hill
3%
Somika
3%
MJM
3%
MKM mines
2%
Sicomines
1%
Sources: Darton Commodities, EO Browser/Sinergise Ltd., USGS Mineral Resources
After the cobalt has been mined, it is sold–sometimes via traders–to refiners. They produce cobalt metal and powder, which are mostly used to make superalloys used in jet engines, or chemicals like cobalt sulphate, which are used to make batteries.
China is even more dominant in the production of cobalt chemicals needed to make batteries than Congo is in cobalt mining. According to data from Darton Commodities Ltd., China accounts for more than 80 percent of the production of cobalt chemicals.
“China controls a massive proportion of the world’s cobalt sulphate,” says George Heppel, an analyst at consultancy CRU Group in London. “Aside from one chemical refinery in Finland, they control pretty much the entire world’s cobalt chemical refining capacity.”
Chemical Strength
Source: Darton Commodities Ltd.
In the next stage of processing, the cobalt chemicals are put together with other metals, such as manganese or aluminum, to make cathodes—the positively charged part of a battery.
There’s a wide range of different chemical makeups of lithium-ion batteries. Not all of them use cobalt, but many of the most popular do. Following the surge in cobalt prices, most batterymakers are researching ways to reduce the proportion of cobalt in their batteries.
Currently in the ascendancy in the electric-vehicle industry are nickel—manganese—cobalt oxide (NMC) batteries, used in most electric cars, and 57 percent of the production capacity for this type of cathode is in China. Tesla Inc., however, uses nickel—cobalt—aluminium oxide (NCA) batteries, which have a lower proportion of cobalt. Cathodes of this type are largely made in Japan. The consumer electronics industry largely uses lithium—cobalt—oxide (LCO) batteries, which contain the highest proportion of cobalt.
Positive Charge
Source: Bloomberg NEF
Finally, the cathodes are brought together with the other components of a battery to make battery cells and then whole batteries in so-called “megafactories.”
After Tesla pioneered the concept of a gigafactory in Nevada, there are now dozens of similar plants springing up across China. Chinese companies, like Contemporary Amperex Technology Co., are rapidly expanding. “We are going to increasingly see a lot of battery manufacturing migrating to China because the materials involved in manufacturing it are so readily available,” says Heppel.
Power Hungry
Source: Bloomberg NEF
“There’s not going to be enough cobalt for everyone to avoid China,” says Heppel. “No matter how clever people try to be, there’s always going to be more readily available materials in China, which gives them a significant advantage.”
Correction: A previous version mislabelled the joint venture countries for the Big Hill mine.