Battery Prices Likely Heading for the Ceiling After Congo Raises Royalty Rate
The Democratic Republic of Congo has declared cobalt a “strategic” substance, nearly tripling the royalty rate miners will have to pay on it. According to a governmental decree, miners will now pay 10 percent in royalties to extract the element.
While we’ve previously warned of the likelihood of a global supply shortage elevating the price of batteries, it seems this will occur only after the Congo taxes the crap out of it. This is the second time cobalt has seen a royalty hike since June, when the region increased the previous 2 percent royalty to 3.5 percent.
Besides the looming prospect of a reversal in the falling price of EV batteries, a spike in the price of cobalt is already ruffling some feathers.
According to Reuters, Congolese Prime Minister Bruno Tshibala signed the decree late last month despite fierce opposition from leading investors. Both Glencore and China Molybdenum have lobbied against mineral tax hikes under a new mining code adopted earlier this year.
As the region is responsible for more than 60 percent of the world’s cobalt production, even minor changes can seriously influence the final cost of batteries. Foreign investors have claimed tax hikes under the new code will hamper further investment and have threatened to challenge some parts of the Congo’s new regulations in arbitration.
While this will no doubt impact the price of electric vehicles, a temporary cobalt surplus has managed to keep prices down through the second half of 2018. This surplus is expected to decline sharply as EV adoption continues and mines begin to scramble to meet demand. Most analysts expect to see cobalt trading at record prices again by 2020 and continue upward from there. The increase in royalties really only serves to accelerate the timeline.
Join the conversation
Latest Car ReviewsRead more
Latest Product ReviewsRead more
- Art Vandelay Best? PCH from Ventura to somewhere near Lompoc. Most Famous? Route Irish
- GT Ross The black wheel fad cannot die soon enough for me.
- Brett Woods My 4-Runner had a manual with the 4-cylinder. It was acceptable but not really fun. I have thought before that auto with a six cylinder would have been smoother, more comfortable, and need less maintenance. Ditto my 4 banger manual Japanese pick-up. Nowhere near as nice as a GM with auto and six cylinders that I tried a bit later. Drove with a U.S. buddy who got one of the first C8s. He said he didn't even consider a manual. There was an article about how fewer than ten percent of buyers optioned a manual in the U.S. when they were available. Visited my English cousin who lived in a hilly suburb and she had a manual Range Rover and said she never even considered an automatic. That's culture for you. Miata, Boxster, Mustang, Corvette and Camaro; I only want manual but I can see both sides of the argument for a Mustang, Camaro or Challenger. Once you get past a certain size and weight, cruising with automatic is a better dynamic. A dual clutch automatic is smoother, faster, probably more reliable, and still allows you to select and hold a gear. When you get these vehicles with a high performance envelope, dual-clutch automatic is what brings home the numbers.
- ToolGuy 2019 had better comments than 2023 😉
- Inside Looking Out In June 1973, Leonid Brezhnev arrived in Washington for his second summit meeting with President Richard Nixon. Knowing of the Soviet leader’s fondness for luxury automobiles, Nixon gave him a shiny Lincoln Continental. Brezhnev was delighted with the present and insisted on taking a spin around Camp David, speeding through turns while the president nervously asked him to slow down. https://academic.oup.com/dh/article-abstract/42/4/548/5063004
Old price: X*1.035 (where X is the "base price" the royalties are on). New price: X*1.10. An increase of 6.5% on cobalt should not make battery prices "head for the ceiling". The first source I could find (https://qnovo.com/82-the-cost-components-of-a-battery/) suggests that the cobalt used in li-ion cathodes costs $10-15 per kWH before this increase. $15 + 6.5% = ... just under $16. A dollar per kWH.
Thank you for doing the math! So the price of a Chevy Bolt goes up $60. Sixty dollars, you say? Why, that's straight through the ceiling, I tell you!