Daily Update: The Messy Business of Cobalt
Today is?Wednesday, December 14, 2022, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global. Subscribe?to be notified of each new?Daily?Update.?
Beneath the red soil of the Democratic Republic of Congo, cobalt, a key ingredient in electric vehicle batteries and consumer electronics, has precipitated a gold rush. Hundreds of millions of years ago, salty fluids in the shallow sea that covered Congo at the time started mineralizing rocks on the seabed, resulting in deposits with unusually high concentrations of copper and cobalt. With few regulations regarding safety and child labor, mining operations in the country have increasingly come under scrutiny. Sensitive to the controversy, battery and EV manufacturers are looking to move away from cobalt through thrifting, recycling and new battery technologies.
Innovation in battery technology is the?preferred path forward?for most manufacturers. In a process known as thrifting, EV makers are attempting to?reduce the amount of cobalt?they use in their batteries. By investing in research to replace cobalt with cheaper elements, manufacturers can save on expensive cobalt and avoid stigma. Despite some success in reducing the amount of cobalt used in an EV battery, cobalt demand is likely to increase due to rising EV sales. As a result, despite lower cobalt inputs per vehicle, cobalt demand from EVs surpassed cobalt demand from consumer electronics this year. According to S&P Global Market Intelligence, plug-in EV demand is expected to increase from 9.7 million vehicles sold in 2022 to nearly 22 million vehicles by 2026.?
Beyond the concerns about unregulated, unsafe mines and child labor, EV manufacturers would prefer to use less cobalt because it is one of the most expensive parts of the battery. According to S&P Global Market Intelligence, the price of cobalt reached a new high in March 2022 at more than $80,000 per metric ton. However, the price soon fell into a?multimonth swoon?due to reduced demand from China. Sweeping pandemic control measures affected logistics and supply chains for the Chinese consumer electronics sector, which made up 30% of global cobalt demand.?
Declining prices for cobalt over the last six months have made some manufacturers reluctant to agree to longer-term supply contracts, which typically command a premium to the spot market. While there is plenty of capacity within the physical market for projected demand in 2023, the lack of longer-term contracts makes it difficult to invest in existing or new mining operations, which may make the?environmental and social problems?with the mines more intractable.?
The European Parliament and Council have been pursuing a provisional agreement to make batteries more sustainable by?recycling more of the battery metals. The recycling targets under the agreement are 63% in 2027 and 73% in 2030 for portable batteries, and 51% in 2028 and 61% in 2031 for batteries from light transport. Eventually, the hope is that the battery metals market in Europe becomes circular, using recycled metals for most needs. The EU has long had a goal of developing a battery industry that is?not critically dependent on external sources.?
For people who study the energy transition, the need to replace internal combustion engine vehicles with EVs is assumed. But environmental and social concerns about the sourcing of cobalt have forced innovation and recycling to move forward at an accelerated pace.
Today is?Wednesday, December 14, 2022, and here is today’s essential intelligence.
Written by Nathan Hunt.
Economy
Default, Transition, and Recovery: Weakest Links Are Expected To Continue Rising In 2023
S&P Global Ratings expects global weakest links to continue rising in 2023, amid growing credit pressures for lower rated issuers, which is leading to more downgrades into the 'B-'and below rating category. The percentage of lower rated speculative grade issuers in the 'B' rating category in Europe has been rising. Europe is the only region with a higher weakest links tally compared with its long-term average. The consumer products sector leads with the highest total number of weakest links, but the high technology, financial institutions and homebuilders and real estate sectors lead with the largest percentage point increases in weakest links in 2022, so far.
—Read the report from?S&P Global Ratings
Capital Markets
Private Equity Investment In Commercial Space, Travel Companies Falls
Global private equity investments in the commercial space launch and travel industry have fallen by nearly half year over year. Including venture capital backed-funding rounds, private equity investment in that sector stood at $1.96 billion year-to-date through Dec. 6, down about 49% from the 2021 total, according to S&P Global Market Intelligence data. Transaction volume is also down sharply, as there have been just 17 major investments thus far in 2022, compared to 36 in full year 2021.
—Read the article from?S&P Global Market Intelligence
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Global Trade
Russian Crude Exports Pivot To Asia After EU Sanctions, Price Cap Bite
Russian seaborne crude exports held steady at around 3 million b/d during the first week of EU sanctions and the G7 price cap as Asia importers continued to soak up deliveries displaced from Europe, according to tanker tracking data. Export loadings of Russian crude averaged 3.02 million b/d in the week ending Dec. 11, little changed from the week before and in line with the November average of 3.07 million b/d, according to data from S&P Global Commodities at Sea.
—Read the article from?S&P Global Commodity Insights
Sustainability
Listen: Could Ammonia Facilitate Europe’s Green Hydrogen Revolution?
Green ammonia is a leading contender as a hydrogen carrier for the energy transition, providing a ready end market and a means of transporting the product over long distances. S&P Global Commodity Insights energy transition reporter James Burgess talks to hydrogen analyst Matthew Hodgkinson and pricing managing editor Mario Perez to explore ammonia's energy transition potential and the latest green hydrogen developments in Europe.
—Listen and subscribe to Future Energy, a podcast from?S&P Global Commodity Insights
Energy & Commodities
California Grid Operator Focused On Reliability, Adding Clean Energy, Western Market Expansion
The California Independent System Operator has experienced record-high peakload, repeated heat waves, years-long drought, rotating outages and significant renewable generation and battery storage additions, all in the last few years. In addition to these challenges, CAISO is working to expand power markets across the Western Interconnection and is facing competition to do so.
—Read the article from?S&P Global Commodity Insights
Technology & Media
Content Most Enjoyed On HBO Max, 2022
The most enjoyed content on AT&T Inc.'s HBO Max has bounced around since the expansion and rebranding of the service from HBO NOW to HBO Max in 2020. According to data from Kagan's U.S. online consumer survey, conducted in September each year from 2018 to 2022, the recent movies category (released within the past two years) was chosen as being most enjoyed by 17% of users in 2020. That number then jumped to 31% in 2021, only to fall to 24% in 2022.
—Read the article from?S&P Global Market Intelligence
Perpetual Inventory Clerk at Macy's
2 年Thanks for sharing ??