Strong growth for cobalt, but some headwinds too | LME Week 2021

Fastmarkets analyst William Adams and reporter Alexander Cook size up the cobalt market ahead of LME Week, which begins Monday October 11

By William Adams and Alexander Cook

Cobalt got off to a quick start in 2021 due to strong demand growth from the electric vehicle (EV) sector, restocking and because of a constrained supply chain out of Africa. After starting the year at $15.30 per lb, Fastmarkets’ benchmark standard grade cobalt metal price climbed steadily to $25.30 per lb by mid-March, a rise of some 65%. Highlighting the disrupted supply chain across southern Africa was the rise in the cobalt payables that climbed to 93.5% in March, from 82.5% at the start of the year.

Since March, the market has quietened down considerably with metal prices initially pulling back while the market destocked after the price climb, with prices then trading within a range of $19.80-25.20 per lb and payables slipping back to 89%, suggesting a more balance market over the second quarter, but tightening more over the third quarter.

EV sales have been particularly strong this year and are expected to total around 5.8 million, up from 3.3 million in 2020 and 2.4 million in 2019. While cobalt demand has benefited from the strong demand growth from the EV sector, demand will not have been as strong as it could have been because there has been quite a shift in attitudes regarding which lithium-ion battery chemistry EV original equipment manufacturers (OEM) are using.

Second generation lithium iron phosphate (LFP) batteries have become increasingly popular in China and look set to be used more extensively outside China too. In China, LFP batteries’ market share climbed to 52% in the first eight months of 2021, up from 39% in 2020 and 33% in 2019. LFP’s gain means slower demand growth for cobalt. In addition, the trend is toward using higher nickel weighted-nickel-cobalt-manganese (NCM) batteries, which have lower cobalt content.

View the cobalt prices in this article

Fastmarkets sees this as a blessing for cobalt because it will reduce the chances of cobalt shortages and unsustainably high prices – it also means shortages are less likely to force OEMs to use non-cobalt chemistries.

The market is thought to be in a slight supply deficit this year and will remain in one next year, but with the giant Mutanda mine set to restart and ramp up again during 2022-23, supply should be able to grow with demand for now. As such, we expect prices to remain elevated in 2022, but below current levels.

What buyers are saying

  • Medical and aerospace sectors are seeing demand return, but face supply concerns caused by a growing electronic vehicle manufacturing sector.
  • The negotiation of future contract agreements has led some buyers to move to multi-year formula options to better secure material. 
  • Despite the spread between European and Asian markets, arbitrage opportunities are limited due to logistical delays. Power issues in China are affecting output and creating concern for Asian markets.
  • Spot availability is reportedly tight, though some consumers are well covered by long term agreements. 

What sellers are saying

  • Arbitrage opportunities are present, but somewhat limited by the long lead times out of China and container shortages at ports. 
  • Consumers have approached long-term agreement talks earlier than in previous years, due to supply concerns.
  • Certain grades of material are facing shortages, particularly briquettes and broken cathode. Prices for standard cobalt grade have increased from $23.40-24.25 per lb on September 1 to $25.85-26.25 per lb on October 1.

London metals week remains a key milestone in the commodities calendar. Find out why it’s still a big draw for the world’s commodity trading community, and discover our special LME Week 2021 coverage on key commodities such as nickel, lead, tin and lithium.

Dec 6-7 | Shanghai

Meet the Chinese and international market in the global hub of battery manufacturing. Enjoy expert insights and unique networking opportunities.

What to read next
Fastmarkets amends the frequency of its spodumene min 6% Li2O, spot price, cif China from Wednesday December 6.
The Fastmarkets Battery Cost Index provides a monthly modelled-cost tracker for various NCM and LFP cells across different countries
The US Department of Treasury has released its definition of a Foreign Entity of Concern (FEOC) for the purposes of the Inflation Reduction Act (IRA) – and there are big implications for nickel.
Black mass payables dropped during the week to Wednesday November 29 with insufficient demand for the shredded, sorted lithium-ion battery packs in key buying markets restricting trade.
Spot lithium prices in China further extended losses over the week to Thursday November 30, depressed by continuous weakness in the futures market and tepid spot demand
Some cathode makers have been switching back to lower-nickel cobalt manganese (NCM) from high-nickel NCM cathodes to reduce costs and encourage consumers amid slowing demand for electric vehicles (EVs), Fastmarkets understands