With ever-changing technology, world-class research, and new discoveries, uncommon metal commodities can rise in popularity seemingly out of nowhere. One such metal is cobalt, which has become more prominent due to its importance in lithium-ion batteries. The lithium-ion battery is a rechargeable battery used to run many of our electronics such as cell phones and laptops, and even electric cars.
As demand for cobalt soars, investors are now trying to invest in cobalt through futures and stocks. Here are some reasons why, as an investor, you should consider investing in cobalt.
Cobalt is one of the few metals used for superalloys
A superalloy is a type of alloy that has excellent mechanical strength and is incredibly resistant to high temperatures, corrosion, and oxidation. Originally developed to be used for jet engines, today superalloys are used in a wide variety of things such as turbines, rocket engines, submarines, nuclear reactors, chemical equipment, power plants, and space vehicles.
There are three main superalloys types: nickel-based, cobalt-based, and iron-based. While nickel-based superalloys are the most common type of alloys, cobalt-based superalloys have a higher melting point as well as a better resistance to corrosion. This can make investing in cobalt smarter than investing in nickel or iron, as technology improves and we need more high-end superalloys.
With 20% of all cobalt being used as superalloys as well as several other uses, there is no doubt that cobalt-based superalloys will rise in demand.
Cobalt has influence for a greener economy
With the state of the world today, many of us are looking at ways to conserve energy and be more environmentally friendly. Cobalt plays a prominent role in increasing the quantity of energy in lithium-ion cathodes. Cobalt in lithium-ion batteries can allow for a longer battery life and efficient storage of solar and wind energy. Investing in cobalt can mean investing for a better, more green future.
By 2020, 75% of all lithium-ion batteries is projected to contain cobalt.
Other green uses such as Electric Vehicles (EVs) are increasing demand for cobalt
Because of its use in prolonging battery life, EVs are now more efficient. EVs have also begun to rise in popularity thanks to the emergence of Tesla (NASDAQ:$TSLA). Major tech and car companies such as Apple (NASDAQ:$AAPL), Google (NASDAQ:$GOOGL), BMW (FRA:$BMW), Volkswagen (FRA:$VOW), and more, are now investing in EVs. As demand for EVs rises, so does the demand for cobalt and the prices of cobalt stocks.
By 2020, it is estimated that one-fifth of cobalt demand will come from electric vehicles.
Cobalt was one of the best-performing metals in 2016
In fact, at 47%, cobalt was the second highest in-demand metals, while Zinc took first place with a 66% in market performance.
The cobalt supply is dwindling
Nickel and copper production is not growing as it used to, making it difficult to obtain cobalt as 98% of it is produced as a by-product of copper and nickel mines. In addition, the majority of mines producing cobalt are located in the Democratic Republic of Congo, a politically unstable and dangerous country.
As such, chemical cobalt is projected to fall into a deficit of at least 12,000 tons by 2020. When that happens, even the US government’s strategic stockpiles cannot help, as there are only 301 tons left. According to the U.S. Defense Logistics Agency, the U.S. government had sold off its supply of cobalt until 2008.
Cobalt prices are on the rise, but nowhere near all-time high
In 2008, cobalt prices exceeded $50 per pound. As demand grows and supply dwindles, cobalt prices are projected to rise — thus it is smart for investors to invest in cobalt now, while the price is still in the affordable range of roughly $16 per pound.
Many experts predict that the cobalt market will be one of the most interest markets to watch in 2017
Chris Berry, from House Mountain Partners, LLC, is interested in China’s stockpile of cobalt and how it will affect the price of the metal, while Edward Spencer of the CRU Group is anticipating a rise in price due to oversupply. Andrew Miller, of Benchmark Minerals, is more concerned about a more secure supply chain for cobalt.
Some things to keep in mind
With its growing demand, it is no wonder that many investors are vying to invest in the metal. However, the market can grow to be unstable, making cobalt stocks or cobalt futures a risky investment. This is because the supply chain for cobalt is incredibly precarious — most mine productions of cobalt occurs in the Democratic Republic of Congo, a country that is rampaged with corruption, violence, and violation of human rights. UNICEF estimates that around 40,000 child laborers are estimated to be working as cobalt miners.
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