Cobalt outlook 2018: Supply and demand
Looking ahead to 2018, the dynamics between an increasing demand forecast and supply constraints are set to continue. “The dominant trends in 2018 will be tight supply and increasing demand leading to higher prices, driven by rising demand primarily from the EV industry,” Rawles said.
According to Benchmark Mineral Intelligence, the total supply needed to meet demand for all cobalt uses next year will be 105,000 tonnes. However, more than 50 percent of the world’s supply comes from the DRC, a politically unstable country where mining has been linked to child labor.
Rawles said he sees the DRC becoming “a bigger portion of the cobalt supply pie,” and said that there will be “no lithium-ion battery industry without growing DRC cobalt supply.”
One of the main projects expected to bring new production into the market next year is located in the African country and run by Katanga Mining (TSX:KAT). Earlier this year, Glencore (LSE:GLEN) upped its stake in the project, which has been on care and maintenance since 2015.
The Swiss mining giant has recently announced that it is set to more than double production from the operation by 2019. CEO Ivan Glasenberg also confirmed that the company is in talks with Tesla (NASDAQ:TSLA), Apple (NASDAQ:AAPL) and VW (ETR:VOW) for cobalt supply deals, although he made it clear that the miner will not sign fixed-price contracts.
“We expect [Katanga] to return to production in the second quarter, with an expanded capacity of 22,000 tonnes per annum initially, although production will be brought on in stages and [it will] take some years to build up to this,” Rawles said. He added that even though the market needs cobalt supply from the DRC, new supply outside the country has a “unique and strong position to gain auto battery market share while offering guaranteed ‘clean’ cobalt.”
Looking over to demand, the electric car revolution will continue to drive prices as supply constraints also increase. In fact, Benchmark Mineral Intelligence forecasts that the cobalt market will reach a deficit in 2022/2023 as “this is when [it] estimate the wider adoption of EVs will happen.”
As demand for lithium-ion batteries increases, cobalt supply will need to reach 180,000 tonnes by 2026, according to the London-based firm.
“I still struggle to see where an ample supply of cobalt will come from to satisfy most EV demand projections,” Berry said. “With the realization that additional mining capacity will be needed to satisfy EV demand, the eyes of the market have started to shift towards smaller-market-cap companies that are development stage and looking at funding opportunities,” he added.
In terms of prices, Rawles doesn’t expect them to rise as much in percentage terms as they have in the past 12 to 18 months. “[But] I do expect prices to continue to rise as supplies remain tight and more auto manufacturers look to secure long-term supplies of cobalt,” he said.
Despite Glencore bringing new production to the market, which could help manage price increases, Rawles forecasts that the upward trend in prices will continue at a “more stable rate” over the year.
Source: https://investingnews.com/daily/resource-investing/critical-metals-investing/cobalt-investing/cobalt-outlook/