DRC logistical issues remain in focus for cobalt supply chain

Market participants in the cobalt supply chain continue to face logistical hurdles when looking to ship out material from the Democratic Republic of the Congo (DRC) to the port of Durban in South Africa

Logistics in the DRC remain in focus, with market participants waiting to see whether the DRC government will lift its export ban on the Tenke Fungurume (TFM) cobalt-copper project, implemented last July.

Some market participants told Fastmarkets the shipment duration for transporting material out of mines in the DRC and to the rest of the world potentially face delays as long as several months due to logistical choke points.

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

If the ban is lifted, market participants expect more supply of cobalt hydroxide in the market, but logistical challenges make it more difficult for all of that supply to enter the spot market at once, some sources said.

“Even if [the DRC and TFM] came to an agreement today, nothing is leaving Africa until June,” a market participant said.

Another market participant said there were difficulties in shipping out the full planned volumes of cobalt hydroxide from the DRC.

There were reports on customs delays for trucks transporting raw materials, with some of the drivers parked in a kilometers-long lines at the border between the DRC and Zambia for weeks in February.

Logistical bottlenecks have been a long-standing issue in the country. Last year, the DRC’s minister of industry said the country needed $58 million in infrastructure investment, which was necessary to sustain the country’s output of battery raw materials.

“Suppose TFM comes online, the majority of the market has expected it to come back. It will take time to move and not immediately flood the market,” a consumer said, adding that they estimate it would take close two months or more for the material to reach its destination ports from the mines. “I don’t see the payables collapsing.”

Demand remains tepid for spot material

Market participants also said they expect the shipment of copper from the project to be prioritized ahead of cobalt because copper is more profitable to deliver compared to cobalt hydroxide, where demand remains tepid for spot material.

“If TFM releases their raw materials, wouldn’t they prioritize copper more than cobalt? It takes ages to get materials out, so it makes more sense to release copper first because copper is more profitable than cobalt,” a second market participant said.

Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China, % payable of Fastmarkets’ standard-grade cobalt price (low-end) was assessed at 55-63% on March 29, unchanged since March 8 but up from an all-time low of 53-55% on February 15.

“There is still 20,000 tonnes of cobalt hydroxide in the Port of Durban, 11,000 tonnes of the same in TFM. Cobalt hydroxide market is oversupplied,” a trader said.

“From what I’m hearing in China it’s bearish, lithium is coming down, [then] there’s the news on TFM. This is why no one is talking about higher prices [for cobalt metal],” the trader added.

A second trader said: “TFM may prioritize copper first, but the problem is that TFM has been building units and continued to do so while shipping copper put. Right now, the warehouse is full of cobalt concentrates. The pressure to further oversupply cobalt hydroxide will only be eased for a short time but will not go away completely.”

Fastmarkets analysts forecast a cobalt surplus of 3,000 tonnes of in 2023 and 13,000 tonnes in 2024.

Despite logistical hurdles, demand weakness for the material remains a key driver for hydroxide payables, prices and downstream prices.

Demand in China remains weak and some sources have noted the Chinese market has not returned to purchase large volumes yet. Further downstream, cobalt sulfate prices in China have started to decline again.

“The lithium cobalt oxide market remains pretty weak and the cobalt-contained market is still losing market share,” the consumer said.

Fastmarkets assessed cobalt sulfate 20.5% Co basis, exw China at 39,000-41,000 yuan per tonne ($5,662.72-5,953.11) on Wednesday March 29, down from 41,000-42,000 yuan per tonne the previous session, with market participants reporting that weakness across the entire Chinese electric vehicle complex was a key driver of the decline.

Keep up to date with the latest news and insights on our cobalt market analysis page.

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