It has two sizeable cobalt mines in the DRC, one being Katanga, which can produce about 28,000 to 29,000 tonnes per year and is set to ramp up to 35,000 tonnes. However, the country prioritizes these value-added chemicals for domestic use, leaving the rest of the world without reliable supplies.Īs far as producers go, Swiss-based Glencore has in recent years become a dominant cobalt producer, accounting for about half the world’s cobalt production at full capacity in a market of about 140,000 tonnes. The raw material is exported to China, which holds a dominant position when it comes to processing cobalt concentrates into usable materials for batteries. Then we have the geopolitics element to consider. It is a sensitive subject, and while there’s no current indication that these things are about to impact the market, should any of them materialize and cause a sudden break in supply, it would be bullish in terms of cobalt pricing. Further, reports of forced labor and child labor continue to taint the market for downstream applications. Logistics remain a challenge, and political upheavals occur regularly. However, the DRC presents a challenging environment to work in. The metal is predominantly the co-product of copper production in the Democratic Republic of Congo (DRC), accounting for about 70 to 80 percent of global cobalt output. There are also a number of factors that amount to a considerable level of vulnerability on the supply side. This in turn would feed into higher demand for the raw materials needed to manufacture the commodities people want, such as EVs. It’s also pertinent to mention that with the global vaccine rollout underway, there is a sense of renewed sentiment that could swiftly translate to a post-COVID economic boom in consumption. Also, in contrast to previous rallies, the world now has substantially larger battery manufacturing capacity - one that continues to grow exponentially. With unprecedented stimulus programs being rolled out to establish a new global green economy in the wake of the COVID-19 pandemic, electrified transportation is at the heart of the new green reality. Where a previous base stalled around US$13 to US$15, the new base might likely settle around US$18 to US$21.Īnother reason cobalt’s price trajectory is more sustainable this time is the focus on global economic recovery. While the price appears to be settling and at the higher level, perhaps around the US$20 level, it also seems to be setting a new base and a platform for continued growth. So, while Elon Musk has made big announcements about Tesla (NASDAQ: TSLA) and its partners designing a battery without cobalt, Tesla also signed a considerable five year cobalt supply agreement with Glencore (LSE: GLEN) last year.īatteries may contain less cobalt these days, but in the future there will be considerably more batteries required, and thus the net amount of cobalt required will increase nevertheless.Īdd to the mix renewed generalist investor appetite for mining and metals as a favorable asset class, and only a handful of dominant players in what is in fact a small market, and one essentially has a perfect storm underpinning the metal’s price trajectory over the foreseeable future. This is not something that battery manufacturers and end users want to take chances with. Put simply: cobalt stabilizes the cathode component of lithium-ion batteries, helping to ensure they do not catch fire. While there is occasional hype around the idea that cobalt will be engineered out of batteries, the reality is that current and next-generation battery chemistries all rely on the metal to perform a crucial safety role. While the COVID-19 pandemic had essentially scalped demand from the aerospace sector, this will become an added cobalt price booster once airplane manufacturing ramps up in a post-COVID economy. ![]() Cobalt is critical in developing superalloys for the aerospace and medical industries. It’s also worth noting that EVs are not the only demand drivers. However, soaring demand for these batteries’ use in electric vehicles (EVs) means we have now reached the point at which the price growth is based on actual demand and not projections and expectations like in the past.Īs EV production edges closer to cost parity with legacy internal combustion engine-driven vehicles, demand growth is not expected to drop off any time soon. Previous price rallies have been predicated mainly on an approaching wall of anticipated future demand. But this time, there is reason to believe it’s different. The critical battery metal has seen wild price volatility before, reaching a high in 2018 before plummeting to recent lows in 2020. There is nothing unusual about this and doesn’t change the perceived view that the long-term macro trend is still up even if this involves micro zigzags within the upward trend.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |