Question
Answer the following question: Should producers and consumers care about where and how the economic inputs necessary to produce popular products are sourced? Answer this
Answer the following question: Should producers and consumers care about where and how the economic inputs necessary to produce popular products are sourced? Answer this question using the principles of basic economic thinking, costs of production, the principles of markets and the tools of supply and demand. Be certain to comment on elasticity of demand as relates to the market for Cobalt.
Battery farming Can the world produce enough cobalt for electric vehicles? The main source is the unstable Democratic Republic of Congo The Economist - Nov 29th 2018| KAWAMA
The only thing that can accelerate as fast as an electric car is the price of the most expensive metal in its batteries. Once a niche input used to strengthen turbine blades, cobalt's value has soared since it started to feature in modern electronics. Most phones need a few grams' worth, and every car requires 5-10kg. That adds up. Many business models are based on ample reservoirs of cobalt that experts warn do not exist. Soaring demand for a commodity is usually met by vaulting investment to ensure supply. Cobalt's case is somewhat different. Nearly all of it is obtained as a byproduct of mining nickel and copper. Even the sharp rise in cobalt's price thus far has not been enough to justify fresh investment in digging more nickel and copper out of the ground. Worse, most of it is in the Democratic Republic of Congo, where neat models of supply and demand count for little. Most incremental demand for cobalt comes from carmakers, which have invested around $100bn in electric-vehicle (ev) technology. According to one estimate, by 2030 at least as much of the stuff will be needed for transport alone as was mined in 2017. America has designated it a "critical mineral". The expected demand spike assumes both a rapid rise in evs, which is likely, but also continued dependence of batteries on cobalt, which is less certain. Battery technology is evolving; some need less or no cobalt. Tesla, an electric carmaker, is among those saying it is "aiming to achieve close to zero usage of cobalt", helping derail a rally in the metal's price this year (see chart). In part, Tesla is responding to concerns about how the stuff is sourced. Several ngos have started to put pressure on tech firms to ensure their gizmos are free of "conflict cobalt". The bit of Congo where the metal is mined is mostly peaceful, but tensions in the country persist, fuelled by money from mining. Perhaps a quarter of production is done by "artisanal" miners, meaning local people working on a small scale. Sometimes they operate on the territory of big miners. "We take shovels, torches, hammers, picks and wire-cutters to make a hole in the fence," says Paul, one such miner in Kawama, near Glencore's operations. "We usually go to the mine at around 10pm. If we don't get caught we'll stay there, digging, until dawn." Cobalt traders, many of whom are Chinese, will buy a night's output for $40a small fortune by local standards. Some groups think artisanal mining can help bridge the gap between supply and demand. Efforts are afoot to clean it up, for example by designating permitted areas. But that will not be enough to ensure the ample supplies needed. A few other places, such as Australia, have small amounts of cobalt. But the biggest source is even trickier than Congo to explore: leagues below the high seas. Much of the floor of the Pacific ocean is lined with nodules rich in cobalt. If there is not enough in the ground, going underwater is the logical next step.
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