Cobalt Supply Chain Risks: The Looming Threat to the Electric Vehicle Industry

The electric vehicle (EV) industry witnessed a significant evolutionary shift in 2020 when leading EV manufacturers began implementing cobalt-free battery technologies at scale. At that time, Tesla Inc. officially transitioned to using Lithium Iron Phosphate (LFP) for its standard vehicle models, while Chinese counterpart BYD Company introduced its renowned "Blade" battery, stimulating widespread adoption of LFP batteries among other EV manufacturers.

LFP batteries enabled EV manufacturers to reduce production costs, eliminate dependence on expensive and ethically controversial materials like cobalt and nickel, while simultaneously improving battery longevity. However, to date, 45% of EV production still relies on traditional cobalt chemistries, primarily Lithium Nickel Manganese Cobalt (NMC) and Lithium Nickel Cobalt Aluminum (NCA), due to their higher energy density.

Now, new research has revealed that this segment of EV manufacturers faces greater supply chain disruption risks than previously thought.

New Research: Cobalt Supply Chain More Vulnerable Than Anticipated

A study conducted by the Chinese Academy of Environmental Sciences has found that the global cobalt network is significantly more connected and vulnerable than previously assumed, with a single disruption in the cobalt supply chain causing ripple effects worldwide.

The vulnerability of the cobalt market lies in geographic bottlenecks. The Democratic Republic of Congo (DRC) dominates the global supply chain, and the stability of this nation remains precarious.

The DRC accounts for approximately 70-75% of global raw cobalt production, with supply routes in the Katanga and Lualaba copper belts highly vulnerable to strikes, geopolitical shifts, and export restrictions.

Previously, we reported that DRC miners are actively shifting from cobalt to copper, driven by rising copper prices amid global electrification trends, as well as global cobalt supply surpluses.

Cobalt as a Byproduct

Unlike other primary commodities, approximately 94% of cobalt is produced as a byproduct of copper (50%) and nickel (44%) mining, with only about 6% coming from dedicated cobalt mining operations. This means that cobalt mine output is primarily driven by the macroeconomics of copper and nickel prices rather than direct demand for EV batteries.

This implies that a collapse in the copper or nickel market could choke off cobalt production. Unfortunately, the midstream and downstream segments of cobalt are no less vulnerable.

China's Dominance in Refining and Production

China holds near-monopoly control over cobalt chemical refining and battery material production, controlling most of the downstream processes necessary to produce lithium-ion batteries for EVs. A comprehensive study by the United States Geological Survey (USGS) shows that while China lacks abundant domestic reserves, it has consolidated control over the global supply chain through aggressive foreign mine acquisitions and heavily subsidized refining infrastructure.

Through its "Going Out" strategy and Belt and Road Initiative (BRI), Chinese state-owned enterprises have acquired Western and local operators. Currently, Chinese companies own or sponsor approximately 15 of the 17 largest cobalt mining operations in the DRC, ensuring direct raw material supply for Chinese industries.

History of Using Strategic Minerals as Trade Weapons

China has repeatedly demonstrated its willingness to use strategic minerals as a tool in trade. Last year, China reimposed export controls, banning or restricting exports of gallium, germanium, and antimony to the United States due to their critical roles in computer chips, fiber optics, and advanced missiles.

In April 2025, Beijing restricted sales of samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, before adding holmium, erbium, thulium, europium, and ytterbium to the list. Similar export controls on cobalt and other strategic minerals could easily disrupt the global EV industry.

The "Robust-Yet-Fragile" Structure of Cobalt Supply Chains

According to the research, cobalt supply chains exhibit a "robust-yet-fragile" structure, meaning the system can withstand many small and random disruptions but remains highly vulnerable to shocks targeting critical nodes.

The researchers found that disruptions in cobalt supply chains and other strategic minerals propagate farther than direct trade relationships. Once a disruption begins, it can spread through the supply chain, creating a network of potential failures four times larger than the physical trade network itself.

Indeed, traditional trade indicators like volume and direct import/export data overlook important secondary and tertiary supply relationship data. This leads to a severe underestimation of how an incident in one part affects the rest.

Countries with large production or refining bases like China and the US could cause massive global disruptions through policy changes, while countries with low output but high dependence like South Africa, Indonesia, and Mexico are vulnerable to random shocks.

Impact on the Electric Vehicle Industry

The dependence on cobalt in EV battery production creates a strategic weakness for this rapidly developing industry. With manufacturers continuing to use NMC and NCA batteries to achieve higher driving ranges, cobalt supply chain disruptions could lead to:

• Significant increases in EV prices
• Production reductions due to component shortages
• Delays in new battery technology deployment
• Increased dependence on alternative supply sources
• Heightened competition to secure supply

While LFP batteries have become an important solution to reduce cobalt dependence, manufacturers continue to use NMC and NCA batteries for premium models where energy density is a determining factor.

The Future of Cobalt Supply Chains

To mitigate risks, the EV industry may need to consider the following strategies:

• Diversify cobalt supply sources beyond the DRC
• Invest in battery recycling technologies
• Accelerate development of cobalt-free batteries
• Build strategic reserves
• Establish multi-partner relationships to ensure supply

The development of new battery technologies like solid-state and lithium-sulfur batteries in the future could further reduce cobalt dependence, but this process will take years to complete and may not completely change the picture in the short term.

In the meantime, EV-producing nations need to clearly recognize cobalt supply chain risks and develop contingency strategies to ensure sustainable development of this critical industry.