Nice article about cobalt from mining.com Cobalt: will 2017 be a year of change?
Roskill | Mar. 3, 2017, 10:21 AM | | 0
Cobalt nanorods may displace rare earth in permanent magnets
After several years of an oversupplied market and weak cobalt prices, many market commentators are expecting 2017 to be a big year for cobalt. The hype is understandable. Prices have risen sharply this year, with Metal Bulletin’s High Grade Free Market price increasing from US$15/lb at the start of the year to over US$24/lb in March. But why?
On the demand side, the answer is clear. Strong demand for cobalt in lithium-ion batteries is set to continue. In addition, cobalt demand is forecast to grow strongly in other key end-use applications such as high performance alloys, tool materials, and catalysts.
On the supply side, many point to the high concentration of cobalt by-production in the DRC as a cause for concern. But while the political situation and infrastructure challenges in the DRC have the potential to impact the market, DRC concentrate supply is growing rapidly as output expands. This should see enough feedstock for cobalt intermediates, refined metal, and refined chemical production reach the market.
While many point to the surging demand for cobalt on one hand and supply risk issues on the other, Roskill expects refined chemical production to able to meet demand over the coming years, and the battery industry should therefore be well supplied.
There are, however, some supply-side constraints which may be impacting the price. Importantly, a number of suspensions, most notably Katanga Mining in the DRC, have contributed to a tight metal market. This, coupled with strategic stockpiling, may be artificially inflating the cobalt price. The Financial Times reported last week that half a dozen funds have purchased and stored an estimated 6,000 tonnes of cobalt, worth as much as US$280M. As detailed in Roskill’s upcoming Cobalt Report, there has already been material taken out of the market in recent years. China State Reserve Bureau (SRB) has moved to purchase considerable quantities of cobalt since 2014.
Set against the narrative of strong demand, supply constraints and speculative stockpiling, the cobalt price could rise much further in 2017. Certainly the cobalt market is prone to volatile prices. Significant price rises were seen over the 2003 to 2008 period, driven by undersupply, perceived fears over future supply shortages, and high levels of global economic growth underpinned by strong Chinese demand. In 2003 the price of high grade cobalt averaged just under US$11/lb but grew to reach an average of over US$38/lb by 2008. At the peak in March 2008, high-grade cobalt metal was sold at over US$52/lb.
As such, the recent price rises do not necessarily reflect the 'new normal' and the possibility of a correction is considerable. Nonetheless, with strong overall demand set against a tight metal market, compounded by recent (albeit some temporary) shutdowns, Roskill anticipates higher average prices over the coming years than those seen in recent years.