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Cobalt hydroxide is produced in Congo, where it is a byproduct
of copper. Hydroxide prices are usually cited as a percentage of
the metal price known as payables.
According to Benchmark Mineral Intelligence (BMI), payables in
August dropped to 46% of the cobalt metal price compared with
around 90% in late 2021 and early 2022 when cobalt metal traded
around $60,000 a metric ton.
Cobalt is currently trading around $32,000 a ton.
"We're unlikely to see prices return to 2022 levels until demand
is able to catch up with the huge volume of cobalt available at
the moment," said BMI analyst Roman Aubry, who expects a cobalt
market surplus of 17,000 tons this year.
"However, the rate at which the EV industry is going, we expect
demand to overtake supply quite substantially in 2027."
Soaring production from Indonesia where cobalt is a byproduct of
nickel is also adding to surpluses.
BMI estimates cobalt supplies from Indonesia will more than
double to above 19,000 tons this year from last, while those
from the DRC will rise more than 14% to 169,000 ton or 72% of
the global total at nearly 223,000 tons.
Congo supplies have been boosted by the resumption of cobalt and
copper shipments from China's CMOC Group Tenke Fungurume mine (TFM)
in July, after a one-year stoppage caused by a dispute with the
government.
Demand meanwhile is growing, but not as quickly as supplies,
partly because of weakness in sales of consumer electronics such
as mobile phones and laptops which use cobalt-containing
batteries.
Also a headwind is a switch to cheaper lithium iron phosphate (LFP)
batteries and away from those that use nickel, cobalt and
manganese (NCM) cathodes, where cobalt content is also being
reduced in favour of nickel to improve the driving range.
"These developments pose long-term challenges to cobalt demand,"
analysts at Morgan Stanley said in a note. "We see cobalt prices
remaining under pressure as supply growth and CMOC destocking
come through."
Morgan Stanley expects to see cobalt market surpluses of 47,061
tons this year, 74,800 in 2024 and 92,660 in 2025.
(Reporting by Pratima Desai; Editing by Bernadette Baum)
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