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Conference delegates networked against a backdrop of an oversupplied market, changing policy and a standard-grade metal price at its lowest point since 2016.
With cobalt primarily being a by-product found during copper and nickel operations, any cutbacks to cobalt production must also factor in sentiment in those markets.
“Copper prices are strong enough for mines to keeping going, Kisanfu isn’t going to stop anytime soon, the CMOC first quarter production numbers were crazy,” one market participant said on the sidelines.
“If copper prices comes down, it could get interesting but I’m not sure those prices will fall far enough to be honest,” they added.
CMOC reported a 392% year-on-year increase in cobalt output of 2024 at 25,202 tonnes for the first quarter. Copper output increased 123% to 147,494 tonnes over the same period.
The company had forecast a production range of 60,000-70,000 tonnes for 2024, but with the first quarter already accounting for 36-42% of that annual estimate, there are market expectations this figure will be revised.
“If the first quarter figures continue at that rate, that’s 100,000 tonnes for 2024 which is unheard of, I don’t know where that extra volume will go and the price is going to be hit by that,” one trader said.
“The copper price is very good now, as a result we don’t expect any of those mines to shut, maybe the non-copper mines outside of Africa might have to though due to low prices,” another market participant said.
The low-end of the price range for standard-grade cobalt is down 15% since the start of the year to Friday May 17, with conference delegates expecting further weakness to follow later this year.
Despite the oversupply of cobalt hydroxide, miners are resisting lower bids in the market and holding firm on current levels for hydroxide on a spot basis.
“The current level is holding firm, there is no reason to sell below, only the smaller guys who are short of cash will for small volumes,” one producer said.
Fastmarkets’ daily price assessment of cobalt hydroxide 30% Co min, cif China was $6.70-6.90 per lb on Monday May 20, unchanged from the previous assessment.With refining costs around $4 per lb for producing metal from hydroxide, some participants at the conference felt the spread between hydroxide and metal prices could narrow beyond the refining cost if demand did not pick up this year.
“If metal keeps weakening, there is no reason why the $4 per lb cost will hold things up, some markets operate at a loss and metal has a longer shelf life than hydroxide, so production will continue,” a third market participant said.
With conference delegates believing that high supply levels will persist for the remainder of 2024, some felt any cobalt price increase had to find an incentive from the demand side.
“The low cobalt price will help stimulate the consumption aspect of the market; it gives the market confidence to invest,” one presenter said.
“Despite the price weakness, the demand level grew and hit over 200,000 tonnes for the first time,” Jose Fernandez, the US under-secretary for economic growth, energy and the environment, said in his opening address to the conference.
The Fastmarkets research team forecasts a cobalt demand figure of 231,000 tonnes for 2024, an increase of 21,000 tonnes from 2023. However, a surplus of 23,000 tonnes of cobalt is also forecast for the market for 2024.
Demand from the consumer electronics market has recovered during the first four months of the year due to stronger personal computer (PC), tablet and smartphone sales. After two years of decline, the global PC market returned to growth in the first quarter of 2024, up 1.5% year on year. Smartphone sales began to recover in the fourth quarter of 2023, with 8.5% growth year on year, according to figures published by Fastmarkets.
Delegates at the conference discussed the topic of government stockpiling, offering up a sense of surprise that China’s Strategic Reserves Bureau (SRB) had not purchased volumes at current levels.
Historically, the SRB will look to buy sizeable volumes when prices are low, and had reportedly bought a total volume of around 8,000 tonnes of cobalt last year in two purchases. One planned purchase had been rumored earlier this year but no such deal occurred.
“The price is at 8-year lows, anyone who is wanting to buy thousands of tonnes is probably seeing now as a good opportunity,” a second trader said.
Fastmarkets’ assessment for cobalt standard grade, in-whs Rotterdam was at $11.50-14.15 per lb on May 20, down from $11.50-14.20 per lb previously.
With the conference taking place in New York, some delegates questioned whether the US would soon make a metal purchase for its strategic stockpiles.
The US Defense Logistics Agency (DLA) historically has stockpiled metals and alloys deemed critical to the US defense sector, buying and selling cobalt metal in large volumes at the turn of the millennium.
The DLA held an estimated 302 tonnes of cobalt in its stockpile as of 2022, according to the US Geological Survey. In 1990, the stockpile had over 24,000 tonnes of cobalt, with the DLA opting to sell this material back into the market over the past 33 years.
“I think the paperwork associated with any purchase by the US will make things take longer than it does elsewhere, they have to agree funding, which in an election year might be difficult,” another market participant said on the sidelines.
Late last year, a recommendation was proposed by a group in the US House of Representatives asking for a “Resilient Resource Reserve” to be created to sustain prices of cobalt and other minerals above certain levels to protect from price volatility.
Some delegates mentioned that black mass is largely unavailable in the United States due to low rates of EV recycling, though supply is expected to increase in the next decade.
“We’re looking at it as a market that’s going to really come on strong in the latter half of the 2020s when a lot of the EVs will have reached their 10-year useful life,” EVelution Energy president and chief executive officer Navaid Alam said during a panel on May 14. “We’re looking at recycling very positively and we really expect to be able to do that around 2026-2027. There will be a lot more clarity in terms of pricing black mass and maybe even the technology will have improved.”
Fastmarkets analyst Robert Searle reported that battery metals including lithium, nickel, cobalt and manganese from battery recycling accounted for 5% of total supply in 2023, and will increase to 13% in 2033. By 2034, roughly 122,000 tonnes of secondary cobalt will be produced from battery recycling, according to his 10-year forecast.
Fastmarkets produces 11 black mass payable indicators for the nickel-cobalt-manganese, nickel-cobalt-aluminium oxides and lithium-cobalt-oxide battery markets.
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