Cobalt metal sustains price rally; longer-term oversupply challenges loom

Prices for cobalt metal have witnessed a sustained rally and recovery in recent weeks, after hitting lows at the beginning of the year, even while market participants see challenging conditions on the supply side in the longer term

Market participants looking to restock cobalt metal and establish positions at lower levels, as well as consistent strength in the US market, are said to be the primary factors helping drive price increases in recent weeks.

“There was a lot of pricing in done by the trade over the last couple months; we aren’t seeing cheaper units available in the market as much now, those guys have sold up, but some of the trade still have units to buy,” a cobalt trader said.

Fastmarkets’ daily price assessment for cobalt standard grade, in-whs Rotterdam was $15.95-17.40 per lb on Monday March 20, widening upward from $15.95-17.35 per lb on March 17. The price is up from a three-year low of $15-16.25 per lb on February 24.

The price assessment for cobalt alloy grade, in-whs Rotterdam stood at $17.50-18.75 per lb on Monday, unchanged since March 13 and up from a two-year low of $16-17.80 per lb on February 21.

Market sources told Fastmarkets that there has also been interest from speculators such as funds to purchase metal at around current levels in order to diversify away from traditional energy commodities into energy transition commodities such as cobalt and lithium.

“The [electric vehicle (EV)] sector is also showing a lot more interest, and some funds are still out there scouting around since [the second half of] last year; if we see further price pick-up which I expect then that could bring some action,” a producer source said.

Cobalt hydroxide has also experienced a rebound in recent weeks, with producers hesitating to sell, saying prices were close to production costs, and mulling whether to stop or slow further production.

The cobalt hydroxide payable indicator, min 30% Co, cif China, % payable of Fastmarkets’ standard-grade cobalt price (low-end) was calculated at 55-63% on March 17, unchanged since March 8 and up from an all-time low of 53-55% February 15.

Longer-term cobalt intermediates oversupply loom

While most participants say they feel the market has been more bullish in recent weeks, the cobalt market faces a range of challenges both on the supply and demand side in the longer term.

Market participants told Fastmarkets on a recent road show throughout Asia that they expect further oversupply in the longer term in the form of intermediaries such as mixed hydroxide precipitate (MHP).

A variety of market participants throughout Asia estimated that MHP could bring on as much as 10,000-20,000 tonnes of cobalt per year, if and when the full capacity of current projects under development came online.

“Our personal view is that [cobalt] prices are dropping and will keep going down because of MHP,” a second trader said. “[MHP projects] will gradually ramp up and more intermediates will penetrate the market.”

Fastmarkets researchers forecast a surplus of 4,000 tonnes in 2023, with that surplus increasing to 14,000 tonnes in 2024.

“2023 will be a hard year for nickel and cobalt players. The last five years everyone has been saying we won’t have enough supply, next year we have too much supply. This is the year of oversupply,” a market participant said.

While more MHP supply is expected to come online, some market participants note there are only limited facilities, focused mostly in China, that can process the material for now and some participants are focused on investing in MHP processing capacity.

Fastmarkets’ nickel mixed hydroxide precipitate payable indicator, % London Metal Exchange, cif China, Japan and South Korea was calculated at 70-76% on March 17, up from 68-72% on March 10.

There are also expectations of further supply in the form of cobalt hydroxide. Market participants have continued to watch for any developments on whether the copper cobalt hydroxide mine Tenke Fungurume (TFM) in the Democratic Republic of the Congo (DRC) will be allowed to export materials.

The project was suspended from exporting in a months-long dispute between operator China Molybdenum Co (CMOC) and DRC state-owned miner Gecamines.

TFM was expected to produce 17,500-20,500 tonnes of cobalt in 2022, according to Fastmarkets researchers. The project has continued to produce hydroxide but cannot export the material, Fastmarkets understands.

“There’s a massive sway of hydroxide coming onto the market, it’s always going to have a negative sway,” the first trader said. “Fundamentally, it’s hard to get bullish in the long term with this hydroxide hanging over.”

Weak cobalt hydroxide prices mean that cobalt market participants in the chemical sector have a cheaper alternative compared to purchasing cobalt metal.

LFPs increasing market share in focus

Longer term, participants in the cobalt market say they are worried that lithium phosphate iron (LFP) batteries will continue to take market share away from nickel cobalt manganese (NCM) batteries.

The chemistry has gained market share, partially because raw materials for the lithium-dominant LFP chemistry are cheaper compared to that for NCM batteries.

“In terms of [NCM and LFP] EV battery chemistries, it’s the trade-off of range and battery cost of production,” an automotive producer source said.

While LFP is the dominant chemistry in China, the chemistry is starting to appear in North America, with Ford announcing a plant producing LFP-powered EVs in 2026.

“LFP has become one of the fastest growing battery chemistries [globally],” a second market participant said. “I thought it was only going to be contained in China.”

Fastmarkets researchers expect LFP to have a 35% share of the market by 2029, up by 6% from 2023.

“Everyone is expecting EV demand to keep going up,” a third trader said. “China is focused on LFP and everyone is saying there’s going to be less cobalt demand, but cobalt is necessary for all batteries.”

Despite the increase of LFP’s market share, Fastmarkets researchers expect nickel cobalt chemistries, which include nickel cobalt aluminium, high-nickel NCM and high-manganese NCM, to make up around 62% of the market share by 2029, down by roughly 8% from 2023.

“For LFP, it’s slowing growth rather than eating cobalt’s lunch” a fourth trader said. “But it is a concern and seems quite China-centric, it’s more of a medium-term issue.”

Oversupply has also driven lithium prices lower in recent weeks, with market participants citing weak demand for EVs in China.

Fastmarkets’ daily assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was $55-58 per kg on Monday, narrowing downward from $55-60 per kg on March 17 and down from $78-80 per kg at the beginning of the year.

Alex Cook in London contributed to this story.

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