Indonesia has emerged as the world’s second-largest supplier of cobalt, contributing to a sharp fall in the price of the battery metal and adding to western anxieties about Beijing’s dominance across the electric car supply chain.
The south-east Asian country generated 9,500 tonnes of cobalt last year — 5 per cent of the global supply — up from minimal volumes before 2021, according to an annual market report by the Cobalt Institute, an industry group. That means it has overtaken established producers Australia and the Philippines.
The surge in the supply of Indonesian cobalt — a byproduct from its rapidly growing nickel industry — has helped drive prices down from $40 per pound in April last year to about $15, according to Fastmarkets.
Despite its rapid growth, Indonesia remains a long way behind the world’s number one supplier, the Democratic Republic of Congo, which holds a 73 per cent global share.
However, concerns about human rights at the DRC mines, as well as China’s operational control of many of them, have left carmakers wanting alternative supply sources or trying to change the chemistry of batteries to reduce cobalt usage.
The US has introduced the Inflation Reduction Act while the EU has introduced the Critical Raw Materials Act in a drive to reduce their reliance on China for the raw materials for electric cars and to foster supplies domestically or from friendly nations.
Indonesia’s emergence as a supplier of cobalt will do little to quell such concerns, given that it is being driven by joint ventures of Chinese companies and local groups.
“The dominance of China in Indonesia poses risks for the wider market, similar to the dominance of DRC production,” the report said, adding that it could undermine the aims of US and EU industrial policies to reduce reliance on China through the EV supply chain.
Global cobalt supply jumped 21 per cent in 2022 to 198,000 tonnes, much greater than the 13 per cent increase in demand.
The price rallied sharply for a year from summer 2021, but has since plunged, driven by Indonesia’s emergence, plentiful supplies out of the DRC and a downturn in sales of portable electronics.
Together with falling lithium prices, the fall has provided some relief to battery manufacturers.
But it has also created challenges for getting new projects up and running in the west. For example, Australian-listed Jervois’s project in Idaho, which was set to be the first US cobalt mine to open in decades, suspended final construction at the end of March because of low cobalt prices and high construction costs.
The report said that cobalt prices were set to remain below $20 per pound this year and that the market would be well supplied until at least the middle of the decade because of strong supply growth out of the DRC and Indonesia.
The surge in EV demand would subsequently push the market into a structural shortage towards the end of the decade with demand set to more than double to 400,000 tonnes by 2030, it said.
Indonesia’s cobalt also poses an increasing environmental problem for automakers since its global warming potential at 36 kilogram of CO₂ per kilogram of cobalt is almost four times higher than supply out of the DRC.