Cobalt shortfall now much closer thanks to Mutanda closurehttps://stockhead.com.au/resources/cobalt-shortfall-now-much-closer-thanks-to-closure-of-the-worlds-largest-mine/
“This should be enough of a catalyst to see prices rise going forward, and although it is too soon to tell how significantly, it appears from early indications that they have already begun to react,” Caspar Rawles, senior analyst at Benchmark Mineral Intelligence, told Stockhead. Rawles said the move would have a big impact on the volume of material available to the downstream.
“The outlook for the market before the announced closure was that it would go through a period of oversupply for at least the next 12-18 months,” he said.
“This pessimistic sentiment on the market has weighed heavily on prices and was one of the key contributing factors in the falling market we have experienced since the start of Q2 2018.
“With the closure this has changed, heightening concerns about availability of supply.”
Glencore will keep Mutanda in production until the end of the year and also has a stock overhang of just over 10,000 tonnes of cobalt hydroxide, which Rawles said would satisfy the market into 2020.
“However due to the uncertainty, people will look to start to secure material or be prepared to pay more for it and early indications are that prices are rising as a result,” he said.
“Furthermore, looking to 2020 and beyond, without the roughly 25,000 tonnes of cobalt from Mutanda the market will be moving into deficit far sooner than was expected.”
Rawles noted that the negotiation season for annual supply contracts was due to start soon and the announcement was likely to weigh heavily on these, with producers in a far stronger position than was previously expected.
“The prices agreed in these contracts will set the tone for spot transactions going into 2020, particularly for cobalt hydroxide,” he said.
In 2018, when prices were at their highest, we saw a big increase in artisanal production associated with cobalt mining,” Rawles said.
“Due to the low price environment, currently artisanal activity has reduced significantly, but if prices do react and rise $10-15/lb from where they are today, it is highly likely artisanal workers will return to the Katanga region in the DRC and we will see production increase from artisanal once again.