In his letter to shareholders, published with the release of 2017 results, Telsa CEO and founder, Elon Musk, announced that he wants to reduce the use of cobalt in the battery cells of his electric cars to "almost zero". He assured the public that Model 3 cars use a lot less of this mineral than competing cars in its category.
The stakes are high in terms of economic performance and ESG (Environmental, Social and Governance) criteria. Regarding the first point, remember that cobalt is in high demand. Its price has almost quadrupled since 2016, now reaching more than $82,000 per tonne. Two markets are pushing prices up: electric car batteries, which represent 50% of demand, and digital devices, especially smartphones.
Child labour at the centre of cobalt debate
According to Darton Commodities, demand stood at 48,900 tonnes in 2016 and 55,400 tonnes in 2017. Analysts expect demand to grow by 40 to 50% in 2018 alone and for quantities to reach 324,400 tonnes in 2030. This push is forcing companies to secure their supplies, as Apple has already liaised directly with mining companies and Volkswagen has launched a tender bid for a 10-year supply of cobalt.
In regard to corporate responsibility, reducing the use of cobalt improves supply chain prosperity. 60% of the world's cobalt comes from the Democratic Republic of Congo (DRC). In this country, however, 20% of the mineral is extracted by hand in artisanal mines by "diggers" who are often children. Investors and NGOs are calling on companies to be more transparent.
The largest stock exchange for non-ferrous metals, the London Metal Exchange (LME), which accounts for 80% of global contracts, has launched an investigation into this issue. And several major industrial companies have participated in a blockchain experiment to ensure respect for human rights in artisanal or semi-automated mines in African countries.
Tesla at the limits of “possible”
Still, while the announcement of Elon Musk has slightly influenced the price of cobalt, a first in two years, analysts do not foresee long-term impact. “The surge in electric vehicle output will be far more significant than the reduction of cobalt intensity, which is close to its limit,” said Simon Moores, a specialist at Bloomberg.
“Tesla still used around 4.5 kilograms of cobalt per vehicle on average, according to Benchmark estimates, and there’s little room for reduction left,” said the American agency. This is already good performance, as electric vehicles consume 8 to 12 kg of cobalt per battery, on average. Elon Musk affirms: "We think that we can get the cobalt to almost nothing".
Some materials specialists doubt it. According to Umicore CEO Marc Grynberg in an interview with Reuters, "There isn’t a better element than nickel to increase energy density, and there isn’t a better element than cobalt to make the stuff stable. So (while) you hear about designing out cobalt, this is not going to happen in the next three decades. It simply doesn’t work".