Indonesia becomes world’s second largest cobalt producer

Indonesia has become the world’s second-largest supplier of cobalt, fueling a sharp drop in battery metal prices and fueling Western fears of Beijing’s dominance in the electric car supply chain.

The country in Southeast Asia produced 9,500 tons of cobalt last year — 5 percent of global supply — compared to the lowest volumes until 2021, according to the annual market report from the industry group Cobalt Institute. This means that it has overtaken the well-known producers of Australia and the Philippines.

Rising supply of Indonesian cobalt — a by-product of the booming nickel industry — has helped push prices down from $40 a pound in April last year to around $15, according to Fastmarkets.

Despite rapid growth, Indonesia still lags far behind the world’s number one supplier, the Democratic Republic of the Congo, which accounts for 73 percent of the global share.

However, concerns about human rights at mines in the DRC, as well as China’s operational control of many of them, are forcing automakers to look for alternative sources of supply or to try to change battery chemistries to reduce cobalt use.

USA submitted Inflation Reduction Act while the EU introduced the Critical Raw Materials Act to reduce its reliance on China for raw materials for electric vehicles and encourage supplies domestically or from friendly countries.

The emergence of Indonesia as a supplier of cobalt will do little to quell these concerns, given that it is driven by joint ventures between Chinese companies and local groups.

“China’s dominance in Indonesia poses risks to the broader market, as does the DRC’s manufacturing dominance,” the report said, adding that it could undermine US and EU industrial policy goals of reducing dependence on China through the electric vehicle supply chain. .

Global cobalt supply jumped 21 percent in 2022 to 198,000 tons, well above the 13 percent demand growth.

The price rose sharply within a year from the summer of 2021, but has since fallen sharply due to the emergence of Indonesia, abundant supplies from the DRC, and a decline in sales of portable electronics.

Together with the drop in lithium prices, this drop has brought some relief to battery manufacturers.

But it also created problems for launching and launching new projects in the west. For example, registered in Australia Jervois The Idaho project, which was supposed to be the first US cobalt mine in decades, halted final construction at the end of March due to low cobalt prices and high construction costs.

The report says that cobalt prices will remain below $20/lb this year and that the market will be well supplied until at least the middle of the decade due to strong supply growth from the DRC and Indonesia.

A surge in demand for electric vehicles will subsequently push the market into a structural deficit by the end of the decade, with demand more than doubling to 400,000 tonnes by 2030, the report said.

Indonesian cobalt is also a growing environmental concern for automakers, with a global warming potential of 36 kilograms of CO₂ per kilogram of cobalt, nearly four times the supply from the DRC.