23 OCT

2018

Asset Class , Green Metals , SRI

Cobalt, the new blood diamond

Electric transport using decarbonised energy is a more sustainable form of transport. The electric battery is an essential main component of “green” automobiles. Lithium batteries – integrating several metals, including cobalt, for its stabilising effect – are, today, the most widely used. However, above and beyond its intrinsic qualities, cobalt is not the “cleanest” in its sector.

30% of current cobalt production is used for lithium batteries. The remaining 70% is used in the production of catalysts and steel alloys.

Cobalt is a core element in the cutting-edge formula used to optimise global battery performance.  It is used for its stabilising capacity, which helps avoid the risk of explosion in lithium batteries. Its main drawback, however, is its high price and volatile market, which are both closely linked to the difficulty of access to this commodity, and political risks in the countries where it is mined. Over 50% of global cobalt production is concentrated in the Democratic Republic of the Congo (DRC), which has recently been accused of human rights violations, associated with the cobalt production industry. According to accusations from several NGOs, including Amnesty International, most of the cobalt mined in the DRC comes from mining smallholdings which may exploit children, some of whom are under 3 years of age, in dangerous working conditions. Once the cobalt has been bought from the mining smallholdings, the metal ore is transported via South Africa and Tanzania through a series of companies in a “laundering” process.

Given the price volatility, cobalt recycling is one of the solutions which must be explored, as it could relieve the price pressure and avoid the risk of involvement in human rights violations in the DRC. Some companies are examining solutions to extract cobalt by recycling batteries. This process could meet up to 10% of the demand for this metal in the automotive sector.  The recycling industry is developing rapidly and will undoubtedly be one of the key solutions once the electric vehicles on the market reach the end of their lifecycle.

Umicore is a key player in this sector. As the leader in the production of catalytic converters and platinum group metal (PGM) recycling, the group is positioned half-way between technologies used in internal combustion engines, with PGMs used in catalytic converters, and future technologies such as cathodes for lithium nickel manganese cobalt oxide (NMC) batteries. Given the group’s long-term view and its capacity to adapt to sector requirements, it is a key player from an SRI viewpoint. The group’s policy in managing the human rights risk in its cobalt supply from the DRC is a key factor confirming the robustness of its business model.