Pricing power is in the hands of producers, while consumers have underestimated how tight cobalt and lithium supply will become, Müller told Metal Bulletin on the sidelines of Mining Indaba in Cape Town on Thursday February 8.
"Large cobalt consumers have failed to secure offers [for material], by underestimating the power of a few suppliers. Usually, they’ve been able to dictate prices so this is a new situation for these giants,’ Müller said.
“At the end of the day, once they realize there's not enough material, they will start funding projects. This isn't a theory, it's our experience. Consumers are already seeking prepayment arrangements; we talk to companies who are open to doing so,” Müller said.
Spot cobalt prices continued their steady ascent last week, while opportunities to pick up more cheaply-priced units ran thin, Metal Bulletin reported on Monday.
Buyers reported that they were struggling to restock in any meaningful way, with most sales last week for cargoes of around 5 tonnes or less – a sign that opportunities to clear up cheaper units are now limited.
Metal Bulletin assessed low-grade cobalt prices at $37.25-38.50 per lb, in-warehouse, on Friday.
There are few future cobalt projects coming into production and a number of planned lithium projects have stalled, Müller.
"There are some cobalt projects coming onto the market over the next two years but nothing after that. The market will simply pay the price. It's not a case of getting a good deal it's a case of getting the stuff,” he said.
"Consumers see there are more than 20 lithium projects coming online within the next five years and they believe it. And the status of lots of these hasn't changed substantially,” he added.
Cape Lambert’s assets include the Kipushi cobalt tailings project in the Democratic Republic of Congo and European Lithium in Austria and there is scope for further acquisition.
"We should be in production at Kipushi within 12 months,” Müller told Metal Bulletin.
"We have a good team of experienced people and a good reputation in the industry. After these projects are brought into production we will be looking for new ones,” Müller said.
Cobalt and lithium consumers are prepared to help fund projects into production by prepaying for material amid projected strong demand from the electric vehicles market, according to Cape Lambert director Stefan Müller.