Cobalt
A False Bottom
March 2019
Prices are expected to keep on going down over the short term, heavily impacting Zambian and DRC operations. Glencore in particular has invested a large amount of money in almost doubling their production capacity in the Congo and has already begun to cut workers at some operations as margins shrink considerably—the company is also still dogged by a reputation hit after they accidentally shipped radioactive cobalt in 2018. Some producers feel that cobalt prices are near their bottom, but this may be hope, rather than firm analysis.

In the longer-term, demand is expected to overtake supply and lead to a resurgence in prices, despite short-term oversupply and high stocks which have placed producers in uncomfortable market situations. New operations, including those in Chile and Australia, are likely to become more viable.

Electric vehicle production continues to be a growing demand driver for cobalt. Indonesia and India are planning to ramp up their battery and electric vehicle construction over the short term, with Indonesia planning to leverage high battery production into a position as a key electric vehicle manufacturer in the region.

Despite cuts, DRC continues to hold the majority of cobalt production, but changes to the country’s ownership and duty regulations may mean that producers may look elsewhere to start new cobalt mines. Its decision to classify cobalt as a strategic metal and raise its royalty rate to 10% has had negative and knock-on effects across the African cobalt industry.

Cobalt has continued to drop over 2019, falling from a full-December average of US$60,368/t to US$45,212/t in January and even further to US$34,060/t in February. Demand has not materialised as fast as producers were hoping, and 2018's massive surge in supply, largely from the Democratic Republic of Congo, has driven prices down fast. Large inventory stocks will prevent prices from jumping up as fast when demand increases, however.