Tesla’s cobalt decision could hit demand for the battery metal

Tesla’s announcement that it has sharply reduced the amount of cobalt that it uses could hit demand for the battery metal, whose price has quadrupled since 2016.

Tesla’s Elon Musk said on Wednesday that it had managed to beat other leading battery makers by reducing the amount of cobalt with its own battery chemistry.

“We think we can get the cobalt to almost nothing,” Mr Musk said.

The statement comes after growing concern that increased demand for cobalt is fuelling exploitation of children and environmental destruction in the Democratic Republic of Congo, which accounts for 60 per cent of world supply.

Mercedes-Benz owner Daimler said on Wednesday it had launched a human rights audit system to make sure its cobalt is not from child labour in the Central African country.

Battery demand makes up about half of total global cobalt consumption due to the growth in electric cars over the past few years. The cobalt is used in the battery cathode to help maintain stability in the battery cell.

Cobalt prices fell for their first time since October on Wednesday, according to Metal Bulletin, to trade at between $43.5 to $44.25 per pound. The price for the metal has quadrupled since January 2016.

Mr Musk said the carmaker had reduced the amount of cobalt in its Nickel-Cobalt-Aluminium battery cells produced by Panasonic below rival battery companies who use a different chemistry.

Korean battery companies such as LG Chem and Samsung SDI, who produce Nickel-Manganese-Cobalt batteries, are expected to commercialise a lower-cobalt battery chemistry by next year.

“Cells used in Model 3 are the highest energy density cells used in any electric vehicle,” Tesla said in its first quarter earnings release. “We have achieved this by significantly reducing the cobalt content per battery pack while increasing nickel content and still maintaining superior thermal stability.”

Analysts at BMO Capital Markets said Tesla’s decision “does imply lower cobalt demand,” given the company’s 10 per cent share of the electric car market.

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