Supply-demand balance and resilience

Cobalt's supply-demand trajectory is characterised by repeated peaks and troughs rather than a single, sustained deterioration in the supply-demand balance. The model projects multiple periods in which realised supply falls below the level required to meet demand before partially recovering. As shown in Chart 22 below, these shortfalls cluster in the late 2030s and early 2040s, followed by a partial recovery in the mid-2040s before supply dips below the required threshold again towards 2050. Unmet demand reaches a peak of 260 thousand tonnes in 2050. This oscillating pattern is analytically distinct from a continuously widening supply gap and is consistent with the by-product nature of cobalt supply. Because cobalt production depends primarily on the economics of copper and nickel extraction rather than cobalt alone, supply cannot adjust smoothly to changes in cobalt demand, resulting in uneven rather than continuous system responses. However, this relationship is not entirely one-directional. Cobalt demand and price can also influence the economics of copper and nickel mines,⁹⁵ meaning that policies aimed at reducing cobalt supply risk by suppressing cobalt demand could feed back into copper and nickel production. This reinforces that these material systems are fundamentally interdependent.

Cobalt production expands rapidly throughout the 2020s, peaks at 300 thousand tonnes around 2030, and then gradually declines. As with most other materials examined in this study, a widening divergence between desired demand and real demand emerges during the 2030s. By the end of the projection period, a substantial share of cobalt the system would otherwise consume is never realised because scarcity and rising prices constrain demand. For cobalt, however, this suppressed demand has an additional dimension. Historically high cobalt prices have encouraged manufacturers to reduce cobalt intensity and adopt alternative battery chemistries, often by using nickel content. Because nickel is itself a critical raw material, this shifts supply pressure between materials rather than eliminating it.⁹⁶ As a result, part of the suppressed demand may reflect permanent technological substitution rather than deferred consumption, with demand responding not only to constrained supply but also to the ongoing transition toward alternative battery chemistries.

The figure also highlights the role of strategic reserves in supporting system resilience.⁹⁷ Reserve releases occur during periods of supply stress and increase substantially towards the end of the projection period, with a maximum of approximately 22 thousand tonnes of reserves being released in 2047. Rather than responding to a single disruption, the reserve appears to compensate repeatedly for a system that struggles to maintain balance. Even so, the largest supply gap occurs at the end of the projection period, despite the greatest releases from reserves occurring at the same time. This suggests that reserves help offset supply shortfalls but are insufficient to close the gap entirely.