Prices of cobalt are may remain low for a while as demand from EV and consumer electronics makers are likely to remain lower than supplies.
Cobalt hydroxide prices have dropped in response to an increase in supplies from the Democratic Republic of Congo. Cobalt, used commonly to make batteries for electric vehicles (EVs), is produced in Congo as a byproduct of copper.
The prices of cobalt hydroxide are calculated as a percentage of the benchmark metal price agreed between sellers and buyers, known as payables. According to Benchmark Mineral Intelligence (BMI), payables fell to 46% of the cobalt metal price in August, some distance from the 90% recorded in late 2021 and early 2022. At the time, a metric ton of cobalt traded for $60,000, compared to current prices around $32,000.
According to Roman Aubry, a BMI analyst, prices are likely to remain low until demand increases. Aubry said:
“We’re unlikely to see prices return to 2022 levels until demand is able to catch up with the huge volume of cobalt available at the moment. However, the rate at which the EV industry is going, we expect demand to overtake supply quite substantially in 2027.”
In addition to EV batteries, cobalt is also important for use in battery-operated consumer electronic devices. These mainly include laptop computers and mobile phones.
While there is a general increase in cobalt demand, the supply rate is much higher. In addition, there is a noted reduction in consumer electronics sales.
Factors Affecting the Falling Prices of Cobalt
Adding to the increase in supply is production from Indonesia. According to BMI, cobalt supplies from the Southeast Asian nation would likely rise over 100% to more than 19,000 tons. The estimate also predicts that cobalt from the Democratic Republic of Congo will jump 14% to 169,000 tons – about 72% of the total global supply.
Another factor affecting cobalt demand is that EV manufacturers are shifting towards cheaper lithium iron phosphate (LFP) batteries instead of batteries that use nickel, cobalt, and manganese (NCM). According to Morgan Stanley analysts, the situation is likely to affect demand for cobalt for a long time.
“These developments pose long-term challenges to cobalt demand. We see cobalt prices remaining under pressure as supply growth and [China’s CMOC Group] destocking come through.”
China’s CMOC Group recently resumed shipment of cobalt and copper from its Tenke Fungurume Mine (TFM) in Congo. In July 2022, shipments from the TFM were halted due to a dispute with Congolese commodity trading and mining company Gecamines over royalty payments. In 2021, TFM was responsible for 10% of the world’s cobalt supply.
Last month, Swiss miner Glencore PLC predicted that cobalt supplies will outstrip demand and create large surpluses over the coming years. The company added that it may add to its stockpiles and reduce production to keep cobalt prices healthy. Last year, the estimated global cobalt supply was about 190,000 metric tons, with 10,000 tons in surplus. According to Jim Lennon, an analyst at Australian financial services group Macquarie, the cobalt surplus for the year will hit 8,600. Lennon estimates surpluses for 2024 and 2025 will rise to 10,200 and 10,400 tons, respectively.