New 5G technology is expected to increase the demand for larger rechargeable batteries which in turn is expected to increase the demand for cobalt from the communications sector, possibly pitting it against the electric vehicle market as both need cobalt.

Larger batteries, using lithium cobalt oxide chemistry (LCO), are needed in 5G phones because the antenna, used to transmit and receive radio waves, need more power than those in 4G phones.

Reuters reported that base station antenna for 5G also need significantly more power, putting pressure on power grids, necessitating the use of energy storage systems, which in China are now being built with cobalt containing lithium-ion batteries.

China is leading the way on 5G sales, which have slowed in recent months, but are expected to increase as growth recovers in the aftermath of the COVID-19 crisis.

“5G will be a major source of cobalt demand in the years ahead,” said George Heppel, analyst CRU, which expects cobalt demand for portable devices to rise to 73 kt (82,600 st) by 2025 from 45 kt (50,000 st) this year.

“Down the road we are likely to see some aggressive bidding for cobalt from electric vehicles and mobile phones, where there isn’t really a chemistry that can compete with LCO.”

Electric vehicles typically use cathodes made from nickel, cobalt and manganese, but there are alternatives such as lithium iron phosphate that do not need cobalt.

Cobalt demand estimates mostly vary between 100 kt and 130 kt (110,000 and 143,000 st) for this year, doubling to between 200 kt and 260 kt (220,000 and 286,000 st) in 2025.

Analysts expect a balanced cobalt market this year and deficits from 2022 as sales of electric vehicles and 5G phones accelerate.

“As the global transition to 5G technology gathers pace, growth in non-EV markets has significant potential to expand across two fronts: portables and energy storage systems,” analysts at Benchmark Mineral Intelligence said in a note.

“Demand growth for energy storage systems has already overtaken electric vehicles, albeit starting from a much lower base, and Benchmark forecasts stationary storage demand to grow by 35 percent per annum through the 2020s.”