Cobalt Demand Outlook — Battery Chemistries, EV Growth & the NMC-to-LFP Shift

Cobalt’s Role in Batteries

Cobalt is one of the most contested minerals in the energy transition. It is chemically essential to the dominant high-energy-density battery cathode formulations, geographically concentrated to a degree unmatched by any other critical mineral, and subject to intense scrutiny over the environmental and human rights conditions of its extraction. Understanding the cobalt demand outlook requires navigating the interplay between battery technology evolution, EV market growth, geopolitical supply dynamics, and the ethical dimensions that shape procurement decisions across the global automotive industry.

In lithium-ion battery cathodes, cobalt serves a critical structural and safety function. Cobalt atoms stabilise the layered crystal structure of the cathode material during charge and discharge cycles, preventing the collapse of the nickel-rich lattice that would otherwise cause capacity fade, thermal instability, and in extreme cases, thermal runaway—the uncontrolled heating that leads to battery fires. Without cobalt, high-nickel cathodes degrade rapidly and pose greater safety risks. This functional importance has sustained cobalt demand even as battery manufacturers have worked aggressively to reduce the quantity of cobalt per kilowatt-hour.

The dominant cobalt-containing battery chemistry is NMC (nickel-manganese-cobalt), which powers the majority of electric vehicles sold in Europe and North America by manufacturers including BMW, Mercedes-Benz, Volkswagen, Hyundai, and General Motors. NCA (nickel-cobalt-aluminum) cathodes, used primarily by Tesla in partnership with Panasonic, also contain cobalt. Together, NMC and NCA accounted for approximately 60 percent of global EV battery installations in 2023, with the remaining 40 percent using cobalt-free LFP chemistry.

EV Growth as the Primary Demand Driver

Electric vehicles are now the dominant source of cobalt demand, having overtaken traditional applications in 2022. Approximately 40 percent of global cobalt consumption in 2023 was attributed to EV batteries, up from less than 10 percent in 2017. This structural shift means that cobalt demand dynamics are now primarily determined by three variables: the total number of EVs sold, the proportion of those EVs using cobalt-containing battery chemistries, and the amount of cobalt per battery pack.

Global EV sales reached approximately 14 million units in 2023. Industry projections converge on 30 to 45 million annual EV sales by 2030 and 50 to 70 million by 2035. Even if the proportion of cobalt-containing chemistries declines (as LFP gains market share) and the cobalt content per NMC battery continues to fall (as NMC 811 and higher-nickel variants become standard), the sheer growth in total EV volumes means that absolute cobalt demand from batteries is projected to increase substantially through the decade.

The mathematics are illustrative: if 40 million EVs are sold in 2030, and 50 percent use NMC cathodes averaging 6 kilograms of cobalt per pack, battery cobalt demand would reach 120,000 tonnes—roughly equivalent to total global cobalt mine production in 2023. Under more optimistic EV scenarios with higher NMC share, demand could exceed 150,000 tonnes from batteries alone.

The NMC-to-LFP Chemistry Shift

The most significant structural development affecting the cobalt demand outlook is the rapid global adoption of LFP (lithium iron phosphate) battery chemistry. LFP cathodes contain zero cobalt, zero nickel, and use iron and phosphate as the active cathode materials. This chemistry offers lower cost, superior cycle life (2,000 to 5,000 cycles versus 1,000 to 2,000 for NMC), and excellent thermal stability—but at the expense of lower gravimetric energy density, meaning shorter driving range for the same battery weight.

The LFP resurgence was driven initially by Chinese manufacturers. BYD has used LFP across its entire vehicle lineup since introducing its Blade Battery technology. CATL supplies LFP cells to multiple automakers. Tesla adopted LFP for its standard-range Model 3 and Model Y in 2021, marking a watershed moment for the chemistry's acceptance outside China. By 2023, LFP accounted for approximately 40 percent of global EV battery installations, up from less than 15 percent in 2020.

The implications for cobalt are significant but nuanced. LFP's market share gains directly reduce the proportion of EVs requiring cobalt. However, LFP adoption is concentrated in specific market segments: standard-range vehicles, urban commuter cars, commercial vehicles, and energy storage systems. The premium EV segment—longer-range luxury vehicles, performance models, and heavy-duty applications where energy density is paramount—continues to rely primarily on NMC chemistry. European and American automakers, which dominate the premium segment, show less enthusiasm for LFP than their Chinese counterparts, in part because range performance remains a competitive differentiator in Western markets.

The LFP versus NMC balance is unlikely to reach a stable equilibrium. Ongoing improvements in LFP energy density (through cell-to-pack integration, LMFP variants, and manufacturing innovation) could expand LFP's addressable market into mid-range vehicles. Simultaneously, cobalt thrifting in NMC could make high-nickel cathodes cost-competitive enough to retain their premium position. The IEA's base case projects LFP reaching 50 to 55 percent of global EV battery market share by 2030, with NMC retaining 35 to 40 percent and NCA and other chemistries accounting for the remainder.

Cobalt Thrifting in NMC Cathodes

Within the NMC chemistry family, there has been a sustained trend toward reducing cobalt content per kilowatt-hour—a process the industry terms "cobalt thrifting." The original NMC 111 formulation contained equal molar proportions of nickel, manganese, and cobalt. Successive generations—NMC 523, NMC 622, NMC 811—have progressively reduced the cobalt fraction while increasing the nickel content to maintain or improve energy density.

The cobalt intensity reduction from NMC 111 to NMC 811 represents a roughly 70 percent decrease in cobalt per kilowatt-hour of battery capacity. Further thrifting toward NMC 9.5.5 or even higher nickel ratios could reduce cobalt intensity by another 30 to 50 percent. However, pushing cobalt content below approximately 5 percent of the cathode creates significant technical challenges: reduced structural stability during cycling, increased sensitivity to moisture during manufacturing, and more complex formation protocols. These challenges are solvable but require additional engineering investment and manufacturing precision.

Cobalt thrifting does not eliminate cobalt demand; it moderates demand growth per unit of battery capacity. Because total battery capacity is growing at 30 to 40 percent annually, even significant reductions in cobalt intensity per kWh can coexist with flat or growing absolute cobalt demand from NMC batteries.

Non-Battery Cobalt Demand

While batteries have become the dominant demand category, cobalt retains significant non-battery applications that together account for approximately 55 to 60 percent of total global consumption. These applications provide a demand floor that persists regardless of battery chemistry trends.

Superalloys used in jet engines and gas turbines consume approximately 15 to 18 percent of global cobalt production. These high-temperature alloys require cobalt for their thermal stability and resistance to oxidation at extreme temperatures. Demand from the aerospace sector is growing as global air travel recovers and military spending increases. Hard metals (cemented carbides) for cutting tools and wear-resistant applications consume another 10 to 12 percent. Catalysts used in petroleum refining, desulphurisation, and chemical processing account for approximately 8 to 10 percent. Pigments, magnets, and other applications consume the remainder.

These non-battery applications are relatively price-inelastic and are projected to grow at 2 to 3 percent annually, adding approximately 10,000 to 15,000 tonnes of incremental demand per year through 2035. This steady non-battery demand means that total cobalt consumption continues to grow even in scenarios where battery cobalt demand is partially offset by LFP adoption and thrifting.

Supply Concentration & the DRC

The Democratic Republic of the Congo dominates global cobalt supply to a degree unmatched by any other country for any other critical mineral. In 2023, DRC mines produced approximately 170,000 tonnes of cobalt, representing roughly 74 percent of global mine production of 230,000 tonnes. This concentration creates a supply chain vulnerability that has no parallel in the modern commodity landscape.

Major DRC cobalt operations include Tenke Fungurume and Kisanfu (operated by CMOC, formerly owned by Freeport-McMoRan), Mutanda and Kamoto (operated by Glencore), and numerous smaller operations. Chinese companies control 15 of the 19 largest cobalt-producing mines in the DRC, giving Beijing dominant influence over the upstream supply chain. Even cobalt destined for Western batteries frequently transits through Chinese-controlled mines, Chinese-operated trading companies, and Chinese refineries before reaching its end market.

The DRC government has taken increasingly assertive policy action to leverage its cobalt dominance. In response to the cobalt price collapse of 2023, the government implemented export quotas and explored a full export ban modelled on Indonesia's nickel strategy. The state mining company Entreprise Generale du Cobalt (EGC) was established to monopolise artisanal cobalt purchasing, channel ASM production into formal supply chains, and capture a larger share of value for the Congolese state.

Non-DRC cobalt supply comes from Indonesia (growing rapidly through nickel-cobalt laterite processing), Russia, Australia, the Philippines, Cuba, and Madagascar. Indonesian cobalt production has surged from near zero in 2020 to over 15,000 tonnes in 2023, driven by Chinese-funded high-pressure acid leach (HPAL) facilities processing laterite ores. This diversification modestly reduces the DRC's market share but introduces its own concentration risk: Indonesian cobalt processing is overwhelmingly Chinese-financed and operated.

Demand Projections to 2035

Cobalt demand projections are more uncertain than those for copper or lithium because they depend heavily on assumptions about battery chemistry mix—a variable that is actively shifting. However, most credible forecasters project net positive demand growth despite the LFP headwind and cobalt thrifting.

Under the IEA's Sustainable Development Scenario, battery-related cobalt demand grows 21-fold by 2040 relative to 2020 levels. Even the more conservative Stated Policies Scenario projects approximately 10-fold growth. These projections assume substantial LFP adoption and continued cobalt thrifting—without these offsetting factors, the demand growth would be even more dramatic.

The current cobalt market is characterised by oversupply, with prices depressed well below 2022 peaks. This oversupply reflects the coincidence of rapid DRC and Indonesian production growth with a temporary slowdown in EV sales growth in 2023-2024 and the faster-than-expected adoption of LFP chemistry. However, medium-term supply-demand balances are projected to tighten as EV volumes continue to grow, and marginal high-cost production in Indonesia and elsewhere may not be sustained at current depressed price levels.

Strategic Outlook

Cobalt's demand outlook is defined by a tension between two opposing forces: the structural growth in total EV battery production and the technological trend toward cobalt reduction in individual battery cells. The net outcome is positive demand growth, but at a rate slower than other battery minerals like lithium or copper.

For the Lobito Corridor, cobalt remains a critically important commodity. The corridor's mineral hinterland in the DRC contains the world's largest cobalt reserves and most productive cobalt mines. Even as cobalt intensity per battery declines, the DRC's dominant market position means that Copperbelt cobalt will remain the single largest source of global supply for decades. The corridor provides the logistics pathway for this cobalt to reach Western markets, an alternative to the existing supply chain architecture that routes DRC cobalt predominantly through Chinese trading and refining networks.

The strategic challenge for cobalt-producing nations is to capture downstream value before the window of cobalt's battery relevance narrows further. The DRC and Zambia's plans for domestic cobalt refining and cathode precursor manufacturing are premised on the logic that processing margin is more valuable—and more durable—than mining margin, particularly for a commodity whose per-unit demand is declining. Investment in processing infrastructure along the corridor, supported by Western development finance from the US DFC and the EU Global Gateway, represents the most direct pathway to achieving this value-addition objective.

Cobalt will not disappear from the battery supply chain. It will, however, transition from a dominant cathode input to a specialised performance ingredient—present in smaller quantities but critical for the highest-performance battery applications. Managing this transition, while maximising the value captured by producing nations, is the central challenge of the cobalt economy in the energy transition era.