* Electric cars to account for 16.9 pct of cobalt demand in 2021
* Consultancy CRU expects 900 T cobalt deficit this year
* Macquarie forecasts deficit of 5,340 tonnes in 2020
By Pratima Desai
LONDON, Feb 15 (Reuters) - Investors are buying up physical cobalt anticipating that shortages of the metal, a key component of lithium-ion batteries used in electric cars, will spur prices to their highest levels since the 2008 financial crisis.
Prices for cobalt metal (COB-CATH-LON) have climbed nearly 50 percent since September to five-year peaks around $19 a lb as stricter emissions controls boost demand for electric vehicles, especially in China, struggling with ruinous pollution levels in some cities.
Consultants CRU Group say electric car and plug-in hybrid vehicle sales could hit 4.4 million in 2021 and more than six million by 2025, from 1.1 million last year.
By 2020, 75 percent of lithium-ion batteries will contain cobalt, whose properties allow electric cars to extend their range between charges, according to eCobalt Solutions, which produces battery grade cobalt salts.
Some 98 percent of cobalt is produced as a by-product of copper and nickel output, so for investors pure equity exposure to cobalt is tricky.
"Cobalt isn't going to massively impact share prices. The funds looked at LME (London Metal Exchange) cobalt contracts , but they aren't liquid enough for the millions they want to invest," a Europe-based cobalt trader said.
"So they are buying cobalt with the intention of sitting on it until prices rise, looking for $25 (a lb) or more."
Swiss-based Pala Investments, a fund focused on the mining sector, and Shanghai Chaos Investment, one of China's largest commodities funds, bought cobalt last year, industry sources familiar with the matter said, declining to specify amounts.
Pala Investments declined to comment, while calls to Shanghai Chaos went unanswered.
"Future demand for cobalt from the EV (electric vehicle) sector is looking tangible and is more positive than originally expected," one commodity-focused fund manager said. "China has some aggressive plans in terms of electric vehicles...It will be a major driver behind cobalt consumption growth."
China's State Reserves Bureau, in charge of building the country's stocks of commodities from oil to rare earth minerals, bought 5,000 tonnes of cobalt metal last year and in 2015, traders said. It is expected to buy more this year.
Highlighting the metal's importance, the U.S.'s Defense Logistics Agency deemed lithium cobalt oxide and lithium nickel cobalt aluminium oxide compounds as strategic and has been stockpiling since 2014. Cobalt is also widely used for superalloys in turbines, space vehicles, rocket engines and power plants.