In 2016, among global downstream demand for cobalt, batteries and industrial applications accounted for 54% and 46%, respectively. In the battery sector, the primary applications include 3C batteries, power batteries, and energy storage batteries. Among these, 3C batteries accounted for approximately 87% of battery demand, while power batteries made up 12%, and energy storage batteries represented a relatively smaller share. The industrial demand segment primarily comprises high-temperature alloys, cemented carbides, ceramics, and other materials. In 2016, China’s cobalt consumption accounted for roughly 45% of the global total. Battery materials accounted for nearly 80% of the nation’s total cobalt demand in 2016, followed by cemented carbides, magnetic materials, and glass-ceramics, which each accounted for 7%, 4%, and 4%, respectively.

Global downstream consumption of cobalt in 2016

Source: Compiled from publicly available information

Downstream Cobalt Consumption in China, 2016

Source: Compiled from publicly available information

Cobalt oxide lithium batteries have a stable structure and excellent overall performance, but they are relatively expensive and are typically used in small-scale lithium batteries for 3C digital consumer products. Ternary batteries boast high energy density, a high voltage platform, and good cycle life. They are not only widely used in 3C digital consumer products but have also gained considerable popularity in the power battery sector. In recent years, they have gradually begun to be adopted in new-energy passenger vehicles and specialized vehicles.

Looking at the cobalt requirements of the two cathode materials, lithium cobalt oxide batteries require roughly six times as much cobalt as ternary batteries (taking NCM 523 as an example). Moreover, the power battery sector is still in its early stages, and the proportion of ternary batteries currently remains relatively small. As a result, at present, the cobalt demand in the battery industry is dominated by lithium cobalt oxide; in 2016, lithium cobalt oxide accounted for nearly 80% of global cobalt consumption in the battery industry. However, examining the trend from 2010 to 2016, with the rapid development of new-energy vehicles and the increasing use of ternary batteries in the 3C sector, the demand for cobalt from ternary batteries has been steadily rising. The share of ternary batteries has climbed from 4% in 2010 to around 18%.

Cobalt's demand in the battery sector

Source: Compiled from publicly available information

Distribution of Cobalt Applications in Battery Materials

Source: Compiled from publicly available information

Currently, most lithium iron phosphate battery systems on the market have an energy density of around 70–90 Wh/kg. In the future, with improvements in materials, it should be possible to reach the threshold of 90 Wh/kg; however, exceeding 120 Wh/kg still presents certain challenges. By contrast, ternary batteries have already achieved an energy density of over 90 Wh/kg, and high-density ternary battery packs can even surpass 120 Wh/kg—for instance, Tesla’s Model S, which uses nickel-cobalt-aluminum batteries, boasts an energy density of up to 170 Wh/kg. Under policy guidance, high-density ternary batteries—specifically those based on nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminum (NCA)—are set to become the mainstream choice in the future.

On January 23, 2017, the Ministry of Industry and Information Technology released the first batch of 2017 “Recommended Models for the Promotion and Application of New Energy Vehicles,” announcing that the first through fifth batches of recommended models from 2016 were all invalidated. Among the vehicles in the first batch of the new catalog, a total of 62 electric vehicles were equipped with ternary batteries, accounting for as much as 50% of the total number of pure electric vehicles. By vehicle type, the proportion of pure electric passenger cars and special-purpose vehicles equipped with ternary batteries was 66% and 61%, respectively; pure electric buses, however, had not yet adopted ternary batteries.

From a domestic perspective, it is projected that China’s sales of new-energy vehicles will reach 700,000 units in 2017, including 500,000 passenger cars and 100,000 each of special-purpose vehicles and buses. By 2020, this figure is expected to climb to 2 million units. Amid the industry’s rapid growth trajectory, the upstream supply chain will also see a swift increase in production volumes. Ternary batteries will not only benefit from the industry’s high growth rate but will also experience even faster growth as their application share rises. According to calculations, from 2017 to 2020, China’s demand for cobalt used in ternary materials for power batteries will grow at an average annual compound growth rate of 70%. From an international perspective, it is forecast that global sales of new-energy vehicles will expand at an average annual compound growth rate of 33% from 2017 to 2020, while the annual compound growth rate of cobalt demand driven by ternary materials will reach 50%.

Domestic New Energy Vehicle Production and Sales Forecast (Units)

Source: Compiled from publicly available information

Forecast of Domestic Demand for Cobalt in Ternary Power Batteries (tons)

Source: Compiled from publicly available information

Foreign New Energy Vehicle Sales Forecast (10,000 vehicles)

Source: Compiled from publicly available information

Forecast of Cobalt Demand from Foreign Power Batteries (tons)

Source: Compiled from publicly available information

According to statistics, from 2010 to 2015, the global energy storage projects saw a compound annual growth rate of 18% in cumulative installed capacity and a compound annual growth rate of 40% in the number of projects. The United States ranks first in terms of installed capacity, followed by Japan and China. Among all projects, lithium-ion batteries account for the largest share; in projects currently under construction and those in the planning stage, their respective shares of installed capacity reach 38% and 83%. Energy storage has become an important component of energy development strategies in many countries, and its future prospects are highly promising. It is projected that from 2017 to 2020, the global demand for lithium batteries in energy storage applications will grow at a compound annual growth rate of nearly 50%. Meanwhile, the penetration rate of ternary batteries is also expected to gradually increase, with forecasts indicating that their demand for cobalt will grow at a compound annual growth rate of nearly 120%.

Global Energy Storage Demand Forecast for Lithium Batteries (MWh)

Source: Compiled from publicly available information

Forecast of Lithium-ion Battery Storage Cobalt Demand (tons)

Source: Compiled from publicly available information

Looking at global smartphone shipments from 2011 to 2016, although the year-on-year growth rate has been gradually slowing down, smartphones continue to trend toward larger screens and longer battery life. As a result, demand for lithium-ion batteries is expected to maintain a steady growth rate in the future. In addition, wearable devices (such as smartwatches and fitness trackers) and drones will further drive the application of lithium batteries in the 3C sector. It is projected that from 2017 to 2020, the demand for cobalt in the 3C sector’s lithium-ion batteries will maintain a stable growth rate of around 3%.

Global smartphone shipments (thousands of units)

Source: Compiled from publicly available information

3C Sector Cobalt Demand Forecast (tons)

Source: Compiled from publicly available information

Cobalt is a key constituent of high-temperature alloys and an important binder in cemented carbides. As the demand for high-temperature alloys and cemented carbides continues to rise in advanced industrial equipment—such as guide vanes for aircraft jet engines, gas turbines for ships and industrial applications, diesel engine nozzles, and guide vanes—as well as in manufacturing tools—including cutting tools, molds, and mining and geological products—cobalt’s application in industry will also keep expanding. It is projected that demand for cobalt in this sector will grow at a rate of around 3% from 2017 to 2020.

Projected Demand for Cobalt in the Industrial Sector (10,000 tons)

Source: Compiled from publicly available information

Global cobalt demand is expected to grow at an average annual rate of 10% from 2017 to 2020, with demand reaching 115,400 tons in 2017 and 127,600 tons in 2018.

Global Cobalt Demand Forecast (tons) for 2017-2018

Source: Compiled from publicly available information

On the supply side, as cobalt prices continue to rise, it’s possible that new projects will come on stream. However, given the 1.5- to 2-year lead time required for capacity expansion, supply-side changes over the next two years remain relatively predictable. On the demand side, the global trend toward new energy vehicles is irreversible, and the increasing share of ternary batteries is an inevitable development. The additional demand driven by power batteries is highly certain. With supply remaining rigid and new demand robust, 2017 will mark a turning point in global cobalt supply and demand: that year, the supply-demand gap is expected to reach around 6,000 tons, and in 2018, this gap will further widen to 13,600 tons.

Global Cobalt Supply-Demand Balance (tons)