Cobalt is a critical mineral used in lithium-ion batteries for electric vehicles and consumer electronics. As the EV and tech markets boom, demand for cobalt is surging. This creates investment opportunities in cobalt mining and processing companies. In this article, we will explore 3 reasons why cobalt stocks have investment appeal.
High growth potential due to rising EV demand
The electric vehicle market is expected to grow at a 25% CAGR over the next decade. This exponential growth will drive massive demand for lithium-ion batteries. As a key ingredient in these batteries, cobalt will be in high demand. Cobalt mining companies with resources to meet this demand stand to see strong growth.
Limited global cobalt reserves
Over 70% of the world’s cobalt reserves are concentrated in the politically unstable Democratic Republic of Congo. With limited reserves elsewhere, existing cobalt resources have additional scarcity value. Companies with ownership of quality cobalt assets outside Congo can command investment premiums.
Vertical integration mitigates price volatility
Cobalt prices are vulnerable to supply shocks. However, companies that control the full cobalt value chain from mining to refining can better manage price volatility. Their vertical integration and downstream processing capabilities provide resilience against market fluctuations.
In summary, the high growth EV battery market, finite cobalt reserves, and benefits of vertical integration make a compelling case for investing in cobalt stocks. Companies positioned to meet rising demand have strong tailwinds for potential shareholder returns.