Glencore considers stockpiling amid production cuts in slumping cobalt market

An oversupply of cobalt and a subsequent price slump have led to trader and producer Glencore considering stockpiling and curtailing production of the blue metal, the company said during its earnings call on Tuesday August 8

Gary Nagle, Glencore’s chief executive officer, said the cobalt market is in a surplus and that it will take time for that surplus to erode.

Fastmarkets’ research team forecasts a surplus of 8,000 tonnes in the cobalt market in 2023, rising to 15,000 tonnes in 2024. Mined cobalt supply, which includes cobalt hydroxide and mixed hydroxide precipitate (MHP), is expected to be 216,000 tonnes in 2023, rising to 257,000 tonnes in 2024.

Cobalt hydroxide prices have been on the decline since the end of July, with market participants expecting shipments of the material around September from China Molybdenum Co’s (CMOC) Tenke Fungurume mine in the Democratic Republic of the Congo (DRC).

The DRC banned exports from the project last year due a disagreement on royalties with CMOC, before reaching an agreement in last month. The project continued to produce hydroxide during the ban.

CMOC’s Kisanfu project in the DRC is also expected to add 30,000 tonnes of hydroxide production per year, according to data from Fastmarkets’ research team.

Glencore produced 21,700 tonnes of cobalt in the first six months of 2023, up by 5% from a year earlier, according to the company’s first-half production report.

The Switzerland-based trader produced 43,800 tonnes of cobalt last year, which accounted for 23% of global mined supply for 2022, according to data from Fastmarkets’ research team.

An increase of cobalt production from Indonesia through high pressure acid leach (HPAL) in the form of MHP, is also contributing to the wider cobalt surplus.

Weak demand from the nickel cobalt manganese (NCM) electric vehicle (EV) battery sector has also contributed to weakness in cobalt hydroxide prices.

Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China, % payable of Fastmarkets’ standard-grade cobalt price (low-end), was assessed at 56-61% on Wednesday, down from 58-63% on August 4. Payables have declined for four consecutive bi-weekly sessions.

The cobalt hydroxide index 30% Co min, cif China, was calculated at $8.76 per lb on August 4, down from $10.17 per lb on July 28 and from this year’s high of $10.57 per lb on July 21. The index will next be calculated on Friday.

Global metal prices, which underpin the payables of cobalt hydroxide, have eased as well in recent weeks. Fastmarkets assessed the price of cobalt, standard grade, in-whs Rotterdam, at $16.00-17.35 per lb on Wednesday, down from $16.40-18.20 per lb at the beginning of the month.

Stockpiling, reduced production and/or a mixture of both are some of the actions the company could take and have taken in a surplus market, Glencore executives said during their earnings call.

“It is something we’ve done before, and it is something that we will consider in the future,” Nagle said, in response to a question on whether the producer would take measures to balance supply and demand in the cobalt market.

Steven Kalmin, the company’s chief financial officer, said those measures could be reducing production and/or stockpiling.

The company shut its Mutanda copper cobalt mine in the DRC in 2019 due to weak cobalt prices. The mine re-opened in the second half of 2021.

Glencore made similar statements earlier in the year when payables were then assessed at their lowest since Fastmarkets’ started pricing the market in 2019, at 53-55% on February 15.

Long-term attractiveness

While cobalt hydroxide prices face challenges largely from the supply side, Nagle said he sees longer-term opportunities for cobalt.

“We still see the long-term fundamentals of cobalt being attractive,” Nagle said.

“There is a period currently of both demand and supply factors which is leading to an oversupply. It’s a buildup in inventories, but it is something that we expect to be largely a short- to medium-term impact, with positive fundamentals for that business long term as well,” he added.

In non-battery applications, participants note cobalt metal used in the aerospace alloys, remains a bright spot in the cobalt market.

Fastmarkets assessed the price for cobalt alloy grade, in-whs Rotterdam, at $18.20-19.20 per lb Wednesday, down from $18.35-19.50 per lb at the beginning of the month, but still at a premium to standard-grade cobalt metal.

Overall demand for cobalt is forecast to increase from 224,000 tonnes in 2023 to 248,000 tonnes the following year.

“Demand from superalloys and traditional applications has seen greater support in 2023, with slower-than-expected demand growth in NCM EV vehicles sales,” Robert Searle, cobalt analyst at Fastmarkets, said.

“But our forecast is for cobalt demand from EVs to witness a compound annual growth rate of 12% between 2022 and 2033, tightening the global cobalt market as early as 2026,” Searle added.

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