Abstract
The cobalt market is a market that has frequent supply shortages and crises. This paper looks at the changes in the cobalt market from the period of the 1970s to 2018 to gain insights into how the cobalt market is responding and adjusting to periods of supply shortages. Particular concern has arisen due to the potential large increase in the need for cobalt in lithium-ion batteries for electric vehicles. Is the supply of cobalt able to grow at the necessary rate to match the projected increase in the production of electric vehicles? The paper finds that some cobalt market adjustments have occurred over the time period in response to supply risk, but these adjustments have not significantly offset the cobalt market characteristics that largely drive its behavior: by-product supply, the large amount of low-cost material in the DR Congo, and the technical advantages of using cobalt in its applications over potential substitutes. The ramifications for post-2018 are probably more of the same behavior. The cobalt market will continue to make incremental adjustments over time as periodic short-run price spikes occur with the corresponding supply “crisis.” The move of the cobalt market to a dominant end use may make the market even more cyclical and prone to supply crises.
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I was pleased to be invited to submit a paper for this special issue in honor of Dr. John Tilton who has been an important role model and mentor for me over many years. I first met John as a transfer Ph.D. student in what was then the Mineral Economics program at the Pennsylvania State University. I had the chance to take his very influential course in the Economics of the Metal Industries that had been one of the primary reasons for me to transfer to the Penn State. As a mid-year transfer, I had not come in on any existing project so I was in need of a dissertation topic and advisor. One day, John came up to me holding a journal article. He said this is an interesting paper. I do not understand it (some of the technical methods). Do your dissertation on it. Then, he walked off. If I had known John better at the time, I would have understood it was probably meant as a humorous suggestion. As a new graduate student, I took it very seriously and had gained a thesis topic and advisor. The journal article argued that copper model demand results of the day were biased because of rationing that occurred due to producer pricing (leading to market disequilibrium). I was of course going to look at the copper market, but another metal market was needed for comparison (and originality) purposes. The cobalt market at the time had a similar use of a producer price and rationing, so it was chosen. Cobalt was a market in “crisis” in the 1970s era that I was writing about in my dissertation because of supply problems. Cobalt is back in the news in 2018 with a potential for another supply crisis. This special issue seemed like a good time to revisit the cobalt market and explore the reasons why the cobalt market is still having supply crises after 40 years. John taught us that markets should adjust and correct over time.
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Campbell, G.A. The cobalt market revisited. Miner Econ 33, 21–28 (2020). https://doi.org/10.1007/s13563-019-00173-8
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DOI: https://doi.org/10.1007/s13563-019-00173-8