LONDON, June 13, 2018 /PRNewswire/ --
Cobalt prices have skyrocketed over the past 18 months. Prices remained in a narrow range between 2012 and 2016, averaging around US$13/lb. In the first quarter of 2017, there was an enormous uptick and prices increased quarter-on-quarter to reach US$32/lb by Q4. In 2018, the price rise continued: prices averaged US$39/lb in Q1 2018 and currently sit higher than US$42/lb.
Price increases have been supported by numerous factors. The most important of these is tightness in the metal market. This has been caused by the closure of some metal production capacity, growing consumption of metal, and continued physical stockpiling by governments, institutional investors, and others. While cobalt is now, broadly speaking, a chemicals market, with refined chemicals representing 60% of refined supply, the price is still largely shaped by the dynamics of the metal market.
Other issues have played their part in the cobalt price rise. The high concentration of mine production in the DRC, which accounted for 70% of cobalt mine supply last year, continues to impact market sentiment. Over the last year, long-standing anxieties over political instability in the country and the fragility of its ageing power and road network, have been compounded by concerns related to changes to the country's mining code, which could see royalties on cobalt increased from 2% to 10%, if it is classified as a strategic mineral.
The outlook for cobalt demand has also been a contributing factor in the price story. Demand for cobalt increased at a rate of 8%py between 2010 and 2017 to reach 118kt. This was underpinned by growth in demand for cobalt across all major end uses, although it was demand from the battery sector that contributed most to the cobalt growth story. This increased at 13.5%py between 2010 and 2017, meaning that batteries now account for more than half (53%) of total cobalt consumption.
Growth in demand for cobalt from the battery sector is set to continue. Demand for lithium-ion batteries is set to grow enormously over the coming decade, driven mostly by the electrification of the automotive sector. This will require huge volumes of additional cobalt oxides and sulphate. Demand for cobalt in batteries is expected to grow at 14.5%py to 2027, by which point demand from this end-use sector alone could exceed 240kt (twice the size of the total market in 2017). With demand for cobalt across other key end-uses such as nickel alloys used in aerospace set to increase too, by 2027 the total market could exceed 310kt.
Several automotive manufacturers looking to position themselves to be able to meet particulate matter and CO2 emissions targets have very publicly began to seek out sources for the cobalt they will soon require. Such moves have bolstered the bullish sentiment in the cobalt market and have helped to elevate prices too.
In light of the outlook for cobalt demand growth, the key question facing the market, and a central issue impacting cobalt prices, is: will there be enough cobalt supply to meet demand?
Certainly, the forecast increase in demand for cobalt will require substantial amounts of new refined capacity. Roskill's new cobalt report identifies several known/anticipated expansions from existing refined producers (especially in China) and possible new projects that could produce refined material over coming decade. While the aggressive expansion plans of major producers like Huayou Cobalt should mean the market is sufficiently supplied for the next five years, after that, more capacity will need to be built. This will require more investment, which given the outlook for cobalt demand and cobalt prices, should be forthcoming. However, while there should be suitable amounts of cobalt chemical capacity for the next few years, a lack of recent investment in metal capacity, coupled with aforementioned shutdowns, is set to lead to a widening metal deficit, which should serve to keep prices high.
New refined capacity will need huge additional amounts of new feedstock. While recycling of cobalt does occur, and is set to increase, the market will mostly rely on mine output increasing, or new tailings projects entering production. Expansions at existing producers (especially Glencore's Katanga Mining in the DRC), coupled with major advanced projects (such as ERG's RTR project in the DRC), should see the market supplied sufficiently to 2023 according to Roskill's base case outlook. Thereafter, a combination of further expansions from existing miners, new projects, and perhaps the re-start of some operations on care and maintenance will be required if supply is to meet demand. With the vast majority of cobalt mined as a by-product of copper and nickel mining, future mine supply is complicated by the fact that cobalt output is principally governed by demand for, and subsequent supply of, copper and nickel.
Roskill's new Cobalt: Global Industry, Markets & Outlook 2018 report provides detailed historical analysis of cobalt production, trade, consumption, and prices as well as ten-year forecasts for supply, demand, and prices. The report contains detailed analysis of production by company and country and in-depth examination of cobalt consumption across all end-uses including batteries, nickel alloys, tool materials, pigments, catalysts, and magnets.
For further information:
Email: Richard Pell, sales manager - [email protected]com
Tel : +44-208-417-0087
SOURCE Roskill Information Services