spglobal.com - September 15, 2023
Analysts and miners still anticipate a cobalt supply deficit in the medium term, as battery chemistries have not shifted away from the base metal completely.
Cobalt has slid into a downcycle in 2023 to date as demand growth slowed and supply increased, but industry participants and analysts say the tide will soon turn…The cobalt price has plunged since a burst of demand from electric-vehicle makers caused a run-up in 2021 and 2022. The London Metal Exchange cobalt cash price was $32,978.50 per metric ton on Sept. 11, down 59.7% from the peak price of $81,900/t on March 11, 2022, data from S&P Global Market Intelligence shows…Cobalt's boom times have been slowed by the mass adoption of no-cobalt iron batteries in China, a major EV supplier and consumer, and efforts by non-China carmakers to reduce the cobalt in their batteries…But nickel-manganese-cobalt (NMC) batteries are higher performance than non-cobalt batteries. And while the amount of cobalt in cars may still shrink, the massive number of EVs needed to replace internal combustion engines is expected to ensure steady demand for years to come…The slowdown in demand growth has Glencore PLC contemplating reducing cobalt production while further increasing stockpiles in the second half of the year to keep prices within a certain margin, Yu said in the August report…The weakening price and slower demand growth have created headwinds for new projects seeking investment. One example is Fortune Minerals Ltd.'s Nico cobalt project in northern Canada, which needs additional funding to advance…"From capital market interest, we've definitely been impacted by the weak cobalt price and the general environment," Troy Nazarewicz, investor relations manager at Fortune Minerals, told Commodity Insights. "On the flip side of that, you've got more secular understanding, not only from governments but industry groups, that are looking to secure supply over a longer time."…Analysts estimate that cobalt is simply in a normal mining cycle in which underinvestment will be followed by a deficit and rising prices. Global EV demand for cobalt is expected to reach 165,303 metric tons in 2027, more than double the 89,140 metric tons estimated for 2023, with cobalt supply going into deficit in 2026, according to Commodity Insights…"When you get down to it, just the magnitude of growth as we go through the energy transition, regardless of what that actual intensity of cobalt in the battery is, results in significant demand growth," Nazarewicz said…Industry participants expect low prices to stunt investment and prepare the market for the next price increase as demand continues upward…"There are more and more signs that, in this low price environment, certain production simply is not going to materialize," Gerbens said. "And if that coincides with demand recovery from the portable consumer electronics market and an acceleration in the demand growth from the EV sector, then very quickly, you will see a deficit situation."