Avainsana-arkisto: foresight

Cobalt: What the price of a mineral can make us inquire about the future?

Mikkel Stein Knudsen & Jari Kaivo-oja:

How can strategic foresight help prepare Finland for a healthy economic future? One element is to detect market movements, which, now and down the line, might affect Finland’s economy and manufacturing. The cobalt market is one such market.

The price of cobalt is surging. The price of the mineral has more than quadrupled over the past 26 months from a historic low of 21,750 $/ton in February 2016 to an all time high of 95,250 $/ton in March 2018. On Friday April 13 2018, trading closed at 92,000 $/ton.

Fig. 1. Five years trading prices of Cobalt.  

This price development is remarkable for a number of reasons, and, as this blog post aims to show, it provides us with important questions and links to the global sustainable energy transition, to a healthy and competitive Finnish economy, and to possible geopolitical challenges of the future. We should pay more strategic attention to the monitoring of the global economy from the perspective of the Finnish manufacturing base. In the future we need strategic value mapping systems, of manufacturing, which include (1) independent models of value, (2) specific strategy and technology models and (3) growth models implicit in the life-cycle of the technology underlying the business model of the family of business models.

The blog post thus briefly covers five main questions:

  1. Why is the price of cobalt suddenly surging like it is?
  2. Why is the price development of cobalt important for Finland?
  3. Why might the cobalt market impose challenges for sustainable transition?
  4. Why does the cobalt market have geopolitical implications?
  5. How can we assess future implications of this issue?

The aim of the post here is not so much to provide answers, but rather to develop insights and key questions for additional research, which we believe would be of interest for the Government, Finnish policymakers, Finnish businesses, industrial stakeholders and academics across a range of fields. We should present a strategic important question: What is the role of Finnish manufacturing in global value creation and production networks?

The price of cobalt as a proxy for demand for electric vehicles?

The main driver of the dramatic price surge is linked by market participants to rising demand for electric vehicles (EVs) (Financial Times, 2018; The Economist, 2018). In the EV-sector lithium-ion (Li-ion) batteries are the preferred battery technology due to it’s energy density (Zubi et al., 2018), with cobalt used for lithium metal oxides. 75% of the global cobalt consumption is going into the battery sector (Fröhlich et al, 2017). As demand for EV’s increase, so does the demand for batteries, and so does the demand for cobalt.

The price of cobalt might therefore be a telling proxy for the general optimism surrounding the business ecosystem of electric vehicles – and the surging price of cobalt can be seen as an indicator that the car and battery industries, at least, are now betting big on EV markets. Of course, this price analysis is not only price indicator trend analysis, we should perform in the context of global economy. However, this is an interesting strategic case example with broader importance. We need to pay more attention to the price monitoring system of strategic resources relevant for the Finnish manufacturing base and economy.

Possible research ideas: Market development and global uptake of electric vehicles; linkages between EV sales and global cobalt consumption, the price monitoring system of strategic resources relevant for the Finnish manufacturing base and economy. 

Finland and the cobalt industry

The largest cobalt refinery in the world is located in Kokkola, and Finland is the second largest producer of the refined cobalt in the world after China. Current (2017) Finnish production is at 12,200 tons of Cobalt per year (GTK, 2018). Finland is not a marginal player in this field of global manufacturing…

While a large majority of the cobalt used for refining is imported (thereby possibly limiting profits added by the price surge), the value of the refined cobalt outputs have increased remarkably. If each ton of refined cobalt is worth $70,000 more than two years ago, an annual production of 12,200 tonnes of refined cobalt is worth $850m more.

The surging price of cobalt alone therefore by itself lifts Finnish exports by as much as €0,5bn in 2018 compared to 2016.

There are current plans of mining for cobalt at Terraframe (formerly Talvivaara) and near Kuusamo, although the developments are not quite without issues (Terraframe, 2017; Yle, 2018; Lapin Kansa, 2018).

Through mining and refining of cobalt as well as through a number of other aspects, this growing battery manufacturing value chain might be a key value-producing network for the Finnish economy of the near future. We need proactive industrial and manufacturing policy platform based on private-public governance. One important idea behind this blog post is that we need a more proactive industrial policy in Finland.

It has indeed already been noted that Finland is well positioned for this growth market (Aamulehti, 2017; Business Finland, 2017), and this month  (April 2018), the Ministry of Economic Affairs launched a new program for Batteries for Finland 2018-2020 in order to strengthen this agenda further (Työ- ja elinkeinoministeriö, 2018). In addition to attracting new international mining investments, the plans aim at generating a higher value part of the battery manufacturing chain.

One important strategic aspect of economic trend research is that we can understand that relative advantages are variable dynamic factors. Therefore, they should be constantly monitored on the basis of global economic changes. Of course, prices changes are such factors.

Possible research ideas: Scenarios and a strategy architecture for Finnish cobalt mining and refining, Orchestration of the EV battery business ecosystem. 

Can lack of cobalt hinder a sustainable transition?

A sustainable global transition requires new technologies for energy production, transportation, etc. However, these new technologies are dependent on various metals, including cobalt. In 2016 Finnish researchers from VTT and the Geological Survey of Finland assessed this ‘Role of critical metals in the future markets of clean energy technologies’ in a peer-reviewed article (Grandell et al., 2016). Here availability of other metals (e.g. silver) is deemed even more critical, but for cobalt the researchers find that with assumptions of a global clean energy transformation, cumulative demand for cobalt for the period until 2050 can exceed known global resources by almost 200 pct.

In other words, positive scenarios for fast climate change action can be challenged by the lack of minerals. If the world transitions with the use of current technologies, there might simply not be enough cobalt available for the job.

It is not without reason that a recent published study concluded that “Cobalt, however, is a reason for major concerns in the Li-ion battery sector” (Zubi et al., 2018).

Possible research ideas: Critical metals as possible limiting factors for cleantech-technologies; Designing optimal policies for reducing dependence on critical metal; Substitutionality of critical metals in various technological fields.

Why does the cobalt market have geopolitical implications?

The main supplier of cobalt in the world is the Democratic Republic of Congo (DRC), which supplies more than 50% of the current global production of cobalt (Fröhlich et al., 2017). Having one dominant global supplier entails supply risks, increased by political and economic instability. In 1978, civil unrest in the DRC quickly increased the price of cobalt by 6.5 times (Bailey et al., 2017), the so called “Cobalt Crisis” (Shedd et al., 2017). Depending on the stability and development of the DRC, there might be concerns regarding continuous supply.

The second supply-related concern relates to the dominant position of China. A 2015-paper in Energy Policy stated that “Whereas experts in the minerals industry are mostly aware of China’s strong position, many stakeholders in and advocates for renewable technologies are not” (Stegen, 2015). This strong position certainly holds true for cobalt, leading to concerns of what might happen if China corners the cobalt market (The Economist, 2018). The Chinese company China Moly  was also in talks to take over Freeport Cobalt’s refinery in Kokkola, but the deal fell through in the summer of 2017 (Reuters, 2018).

If there is a global scarcity of certain minerals, and if one nation holds the key to these minerals, it is easy to imagine the availability might have important geopolitical implications (cf. Øverland et al., 2017).

Possible research ideas: Security and geopolitical implications of mineral resources for clean energy technologies; black swans and resilience research.

What can we say about the future?

Like with any other raw material, the price and the criticality of cobalt hinges on supply and demand. In the terms of minerals these fundamental variables can meaningfully be subdivided into specific variables (adapted from Martin et al., 2017):

Fig. 2. Determinants of price and criticality of minerals (inspiration from Martin et al., 2017)

The supply of cobalt available for the market will be driven both by the amount of cobalt resources and reserves naturally available, by the amount of cobalt that is recycled, and by the amount of cobalt actually produced. The production supply will be a function of price and profitability, but other issues like social and environmental concerns might also affect production constraints, e.g. in Finnish mining projects.

Similarly, demand for cobalt will be a function of the demand for technologies using cobalt, but also shaped by the technical and economic feasibility of using alternative raw materials or using alternative technological solutions (ie. substitutionality).

A thorough foresight or technological forecast study should therefore consider each of these variables individually, in the case of Finland or even globally. Given the potentially major role of cobalt for sustainable transition, for global geopolitical concerns or ‘just’ for the economy of Finland, this would however be a very interesting endeavour to pursue.

Possible research ideas: Scenarios for global cobalt demand; Scenarios for Finland’s mining industry.

References and additional information


Mikkel Stein Knudsen
Project Researcher, Finland Futures Research Centre, Turku School of Economics, University of Turku

Jari Kaivo-oja
Research Director, Adjunct Professor, Dr, Finland Futures Research Centre, Turku School of Economics, University of Turku

This research work has been supported by the Finnish Strategic Research Council [grant number 313395]. The blog text refers to the preliminary foresight and background analyses of the Manufacturing 4.0 project.


Photo: Tesla, pixabay.com

Fast Foresight Prototyping for Christmas Mood 2056

Sirkka Heinonen

Foresight can be conducted as “light version” by applying the “fast foresight prototyping” approach. Fast prototyping is a tool frequently used in design, or as rapid prototyping of physical objects or in software engineering. Fast foresight prototyping is based in analogy on thinking that best ideas and insightful innovations may lurk just around the corner – you just have to start catching them and not go too deep in theoretical reflections. That approach is reserved for serious and systematic futures research projects and processes. The research staff of Helsinki Office of Finland Futures Research Centre (FFRC) recently gathered in its last monthly meeting around an improvised fast foresight prototyping exercise. The topic given was “Futures Calendar Window to Christmas 2056”. We made a mental time-travel in three small groups to probe possible images of future Christmas, jumping directly 40 years ahead, and not even looking back but just immersing in the imaginative scenes of the 2056. Futures window is a metaphor used as a method for visualising weak signals, originally developed by Elina Hiltunen. When exploring possible futures, identification of weak signals is fruitful. You both open your mind to future possibilities, sharpen your peripheral vision for detecting weak signals, and then start interpreting your findings. Of course, all this is very polemic and subjective and accordingly very easy to criticize since the weak signals yield different interpretations for different persons.

What glimpses to future social mood at Christmas in Finland did we then see? We didn’t open the futures window to identifying and showing weak signals specifically, but more generally futures images or scenes. Naturally, the origin and sense of Christmas is embedded in Christianity. However, through two millennia Christmas has evolved far beyond being a religious meme, it has become a universal cultural event or festivity, to the extent even losing much its original meaning. Another interesting topic for futures research would be futures of religion that in fact represents a research gap in our field, but it was not the focus of this exercise.

I want to now share some of the ideas we generated as an inspiring co-creative effort in less than an hour. Jim Dator’s Second Law of the Futures claims that “any useful idea about the futures should appear to be ridiculous” can be born in mind and applied here when reading our findings from our “futures calendar”. The main aim was to explore futures, while a corollary aim was to have fun while doing so – a serious teaching given to us by our professor Pentti Malaska. The topic was not given beforehand, but announced at the meeting. The three sub-topics addressed were “food”, “relations”, and “traditions”.

The group on Food at Christmas 2056 focused on the social elements – food at Christmas is still very social and meaningful – something that unites people. There are some new elements, such as huge popularity of vegetarian, vegan, organic and local food. In addition, through multiculturalism a huge array of different dishes and rare spices are brought to everybody’s table. Vegan barbecue with artificial meat is a new concept. Rice is replaced by barley, and the Finnish food innovation from  forty years back (2016) nyhtökaura = pulled oats is mainstream. Oats and bean based protein food has also become an export hit.  However, we also carefully preserve some things from the old times and thus retro-food is blooming.

nyhtokaura-gold-green-foods
Nyhtökaura, Gold & Green Foods, http://www.goldandgreenfoods.com/

Tourism and time travelling associated with Christmas food to Lapland is growing. This means that people travel to Lapland to experience Christmas at any time. So Christmas is not happening just at Christmas, but at any time all year round. Also, companies – especially techemoths invite families of employees, customers etc and arrange Christmas parties within the company or for work vacation. Food is not only social and meaningful, but it has also become political. Finland has a food minister. The famous Finnish Christmas declaration from Turku, our ancient capital, originating from the 1300s has been introduced worldwide as diplomatic peace declaration to Aleppo and other major conflict places – as manifestation of universal peace religion.  The declaration is read out loud to remind people that the time of peace and harmony has begun, and offenders will be facing harsh punishments.

The group on Relations at Christmas 2056 opened up a futures calendar window that is more about personal featuring. The Singularity is already here. People have their persons as robotic and as physical selves.  The robotic selves pull the real selves in sleighs around Christmas time. Due to climate change there is no more snow in Finland. The sleigh is of course levitating, with wheels for casual touchdowns once in a while.  Besides extending living as robotic selves, people may reincarnate as panoptic but friendly sauronic eyes, sending beams to targets with whom they want to continue communicating and relating. The eye may also be satisfied with communicating with the beams only, back and forth. Some people, on the other hand, want to give up totally the digital life and return to analogue and manual devices. Reports can be written with an ancient typewriter, already obsolete, but again 3D printed following the old design, not having to worry at all any privacy issues or cracking, not to mention academic administration systems.  The relations between people are more platonic and sometimes distant. The relation between the robot and the real person may be warmer and safer than between people.

The group on “Traditions at Christmas 2056” focused on lights. At dark Christmas time, the role of lighting is important, both physically and symbolically. People tend to put the lighting on in their houses and yards every year earlier and earlier. As a result, the lights are turned and kept on as constant winter lights, except on Christmas when people instead enjoy the darkness. Gifts are given as immaterial gifts, only a few people give any more material gifts. Members of the families are not even giving gifts to each other, but instead to other families, let’s say charity gifts to a family in Africa. The extremists give gifts to the iconic Finnish welfare state, this form of charity is common – pour money to the Finnish state to keep the state going. Santa Claus has already retired, it is just reindeers who travel from people to people, not necessarily giving gifts but to move people along their route – giving mobility services as a gift. What if people are very satisfied in their work, enjoying relaxing everyday life? Then there is no more need to take breaks, to de-stress. Christmas transforms into festivity for menial work – cleaning and repairing the house, knitting, laundering etc. as the opposite to old days’ concept of relaxing during Christmas, and harvesting energy for further work.

All in all, Christmas is not disappearing. In 2056 it has re-invented itself. It has become a generic social and meaningful time for peace and harmonious interaction. The terrorists’ tragic and pitiful attacks on Christmas fairs is just a token of the powerful meaning of Christmas – as symbol of universal peace and love among all living beings.

Merry Christmas and a More Peaceful New Year!

 

Orienteering with the Futures Map

Petri Tapio

Futures map is a metaphor introduced by a Finnish futurist Osmo Kuusi. He sees the future as a terrain including many possible paths. The futurist’s task is to define plausible alternative paths in this terrain, the scenarios. The paths can concern business branch development options for a client company, societal sector development for public administration, or, for example, career options in personal life management for individuals. I here illustrate the problematics concentrating on energy issues in businesses.

Including strategic thinking and especially the backcasting concept to the metaphor of futures map brings corporate foresight process close to the orienteering sport. In backcasting, the actor sets a goal where to strive for and finds out alternative scenarios, how to get to the goal. Similarly in orienteering, you set a goal, a control on the map, where you wish to run as efficiently as possible. You figure out the alternative routes to the control and try to think beforehand which of them is the fastest. Uncertainty is inherent in decision-making as you do not know for sure which alternative is the fastest.

You also need to consider the risks in strategic foresight as well as orienteering – should you make a short route and stroll through a swamp taking the risk that it is so wet that you actually lose time with the shortcut. Or are you playing it safe and take the easy route of longer distance but easy terrain. For example, are you investing to new technology that promises to solve your production problems or use existing technology more efficiently?

According to my personal experience in the Turku School of Economics orienteering team some controls are really difficult to find. There are four possible reasons for the difficulty:

1) The terrain is heavy, for example having consecutive controls on top of two hills and between them a deep valley. For example reducing energy consumption of a firm is a task that requires lot of work rather than simple tricks. In this case consistency and diligence are called for.

2) The control is difficult to find as it is in a terrain where you see very little forward and get easily lost. For example you wish to take into account all relevant aspects affecting the company’s economic, social and ecological sustainability. In this case it is important to check the map for a clear location and use the compass to move forward.

3) Your skills are not trained well enough, that is you know where to go, but do not know how to get there. This is the case for example when there are no experts of energy saving in the company. This just requires better education in futures research methods.

4) You are lost in the first place. For example you have no quantitative information of energy consumption in the firm that could be used in the strategic decision-making process. In this case you should turn back to the last place where you knew for sure where you were. Think calmly, get the information you need and only then move forward.

When orienteering, you need a compass to know the directions. It does not tell you location but it tells you which way north and other compass points are. I think the parallel for a compass in orienteering with the futures map is consciousness of your values. Ethics form the basis for responsible business (see Matti Minkkinen’s earlier blog post).

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The author is Professor in Futures Research and responsible for the postgraduate studies of Futures Studies in the Doctoral Programme of Turku School of Economics.

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Linturi, Hannu & Rubin, Anita (2014) Metodi, metafora ja tulevaisuuskartta: osa 1. http://www.ebarometri.fi/metodi-metafora-ja-tulevaisuuskartta/

Robinson, John B. (1990) Futures under glass: a recipe for people who hate to predict. Futures 22(8): 820–842. doi:10.1016/0016-3287(90)90018-D http://dx.doi.org/10.1016/0016-3287(90)90018-D

 Picture from Jukolan viesti 2016 orienteering relay © Riku Levälehto