Global Cobalt Price & Demand

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Cobalt Price Forecast

Cobalt prices are expected to significantly rise over the next two years while the industry attempts to meet an increasing demand for the batteries used in electric cars. Citi reported that the price for cobalt is $75,000/mt ($34.01/lb) in 2018 and will likely increase to $80,000/mt in 2019 and 2020. It is projected that "short-to-medium term cobalt supply will increase although at a slower pace than demand creating a supply deficit up until the end of 2019." Darton Commodities reported in 2016 that cobalt demand is expected to surpass "120,000 tonnes per annum by 2020, up approximately 30% from the 93,950 tonnes consumed in 2016."

Price Forecast for Cobalt

Cobalt is expected to trade at 88,839.28 USD/MT by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 76,819.35 in 12 months time.

Cobalt prices are likely to rise significantly in the next two years as the industry struggles to meet rising demand for batteries used in electric vehicles, BMO Capital Markets said Monday.
It sees the annual average cobalt price peaking at $40.50/lb ($89,290 mt) in 2019, from current levels of about $30/lb and does not rule out the possibility of cobalt prices doubling from current levels in the time frame. In 2017, Platts reported that "99.6% broken cathode cobalt -- the grade often used in chemicals and batteries -- has averaged $25.58/lb." According to their findings, cobalt began last year "at a midpoint of $14.75/lb." Recent news states that cobalt is around 40usd/lb on Feb 28, 2018.

MARKET WORTH $6.6 BILLION ANNUALLY

"This makes cobalt the best performer of the commodities we cover over the past year in terms of price gains, and at current spot market pricing, a market worth $6.6bn per annum," BMO said. It also said cobalt had risen back above the longer-term inflation-adjusted average of $22/lb.
"Cobalt has a history of spikes higher following a period of underperformance, which is mainly related to the structure of the supply side. Without a primary mine supply side to speak of, cobalt has less of an elastic supply buffer than peers," the BMO reported.

Despite the fact that the majority of the world's cobalt is a result of "either nickel production or copper output," this byproduct is not produced in all copper mines.

Cobalt Demand and it's growth rate

Darton Commodities reported in 2016 that cobalt demand is expected to surpass "120,000 tonnes per annum by 2020, up approximately 30% from the 93,950 tonnes consumed in 2016."
In 2020, battery consumption is expected to represent "60% of all cobalt demand", this represents a 58% rise in battery demand from the 2016 figures (Darton Commodities, 2016).

The increased demand for battery consumption will likely be a result of a rising demand for electric vehicles. "The rechargeable battery segment has become both the largest and potentially the fastest growing end-use of cobalt." The growth of cobalt demand is largely attributed to the electric vehicle market's "use of lithium-ion batteries."

DRC’s place in the cobalt market is impressive. "Of the 123,000 tonnes produced globally in 2016, the DRC produced 66,000 tonnes (or 53.66%), although the true number is probably higher when including the black market and China’s production." China should be taken into consideration because it the majority of what China produces is sourced "from ore and partially refined cobalt from the DRC."

Cobalt can be "found in abundance in the Earth’s crust in trace quantities. The difficulty lies in finding it in purities high enough to justify production — a problem compounded by historically low cobalt prices." Currently, the majority of cobalt a result of nickel and copper extraction. In fact, a Moroccan mine, called Bou-Azzer, is the only mine in the world with primarily mines cobalt. This mine annually produces "2,000 tonnes of cobalt."

Studies indicate that the consumption of cobalt with likely rise "by 5.1 percent annually, from 96,500 tonnes today to 124,000 tonnes by 2020." This highlights an impending issue. The demand for cobalt will likely increase but with the supply is lacking. This is because cobalt is mostly produced as a byproduct and not the focus of production.

Another report shows that there is a "strong demand growth forecast

COBALT SUPPLY

Cobalt deposits are located around the world but the highest concentration is "in the African Copper Belt with over 60% of global cobalt production from a single country — the Democratic Republic of the Congo (DRC)." In 2016, about 60% of cobalt was produced as a copper byproduct, 38% as nickel byproduct and the leftover 2% was produced from mines that primarily focused on cobalt.

This indicates that, unlike other metals, "changes to global copper and nickel production are the main determinants of changes in cobalt production rather than the supply-demand dynamics and pricing of cobalt itself." According to the United States Geological Survey, in 2016, it is estimated that "global cobalt in-situ reserves were 7 million tonnes." The survey also reported that about half of the cobalt in-situ reserves were in the DRC.

Citi reported that the price for cobalt is $75,000/mt ($34.01/lb) in 2018 and will likely increase to $80,000/mt in 2019 and 2020. It is projected that "short-to-medium term cobalt supply will increase although at a slower pace than demand creating a supply deficit up until the end of 2019." Darton Commodities projected that in 2016 the demand for cobalt will likely surpass "120,000 tonnes per annum by 2020, up approximately 30% from the 93,950 tonnes consumed in 2016."

Citi projects "the market deficit to widen further to 5.8-12.1kt for the period of 2017-20 from the previous expectations of 5-11.2kt." This increased deficit is mostly driven by the decreasing supply at the Tenke mine located in the DRC. With these supply slippages in mind, Citi lowered their mine production estimates to 124kt, c1% below their former estimates. This is primarily a result of the "lower cobalt ore grade reducing production volumes at Tenke." Citi also lowered their 2017-20 forecast to a CAGR from 5% to c4.5% for medium-term production.

COBALT projected PRICE

As previously stated by BMO Capital Markets, it is likely that cobalt prices will rise significantly over the course of the next two years while market struggles with meeting the increased demand for the batteries used in electric cars. It is also projected that the cobalt supply for the short-to-medium term will rise "a slower pace than demand creating a supply deficit up until the end of 2019."
BMO Capital Markets reports that the average annual price of cobalt will peak at "$40.50/lb ($89,290 mt) in 2019, from current levels of about $30/lb." However, this does not mean that it isn't still possible for cobalt prices to double in the future from their current price. At the close of last year, Platts reported that "99.6% broken cathode cobalt -- the grade often used in chemicals and batteries -- has averaged $25.58/lb." Cobalt began the 2017 "at a midpoint of $14.75/lb."

Global cobalt production and estimated reserve

Global mined production of Cobalt stood at 123,000t in 2016 with Democratic Republic of Congo (DRC) as the largest producer with a share of 53.66% and South Africa as the producer with the lowest share at 2.44%.

In the same vein, Global Estimated Reserves stood at 7,000,000t with DRC with the largest reserve of 48.57% and South Africa with the smallest reserve of 0.41%.

EFFECT OF SUPPLY AND DEMAND ON COBALT PRICE FORECAST

The demand for essential battery minerals is increasing due to the "energy storage revolution." Industry giants in the battery market are increasing their production of batteries "with mega-factories and are actively acquiring raw materials through off-take agreements. However, supply constraints are emerging due to the fact that "traditional metal miners are scaling back production." This is impacting byproduct metals, like cobalt, that critical to battery chemistry.
"Global Energy Metals is quickly leveraging its strategy of material supply against global estimates that see consumption for refined cobalt to exceed 100,000 tonnes in 2017." It's clear that growth for most metals has grown stagnant in recent years. Cobalt is the exception to this. This metal has continued to grow which has propelled it's "price to a decade high with demand brought on by the energy storage revolution." Electric vehicles, in addition to rechargeable batteries, are expected to also positively contribute to the upward demand for cobalt. It is estimated that the demand for this metal is likely to grow at about 5-8% per annum on average over the next several years.

CONCLUSION

In conclusion, Cobalt's demand by Fortune 500 companies such as Apple and Tesla has made the supply fantastically tight and set to get phenomenally tighter and as the "law of demand and supply" states in Economics, where supply is high and demand is low, the price is bound to go up. The Cobalt price is almost certain to keep going up within the next two years.
Part
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Part
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Cobalt Supply & Demand

Overview

Cobalt prices are skyrocketing as increasing demand surpasses supply. The price of cobalt is predicted to continue to increase as supply constraints, mainly the political instability in the Congo, continue and the demand continues to grow due to the movement towards electric vehicles and away from fossil fuels. Cobalt deficits are projected for the near future.

Current trends

Cobalt demand and hence, prices have increased drastically in recent months. Cobalt trades at nearly $29 per pound, doubling since the beginning of 2017 and the global demand exceeded 100,000 metric tons in 2017. There is a growing concern that the demand of cobalt may exceed the supply in upcoming years.

Current Product Trends

This unexpected increase in the demand for cobalt is mainly due to the rising production of electronic vehicles and the exponential growth of the mobile technology industry. About half of the cobalt mined is used to produce batteries, which in turn are used for consumer electronics and electrical vehicles. The demand for cobalt will continue to increase as more countries turn to electric vehicles as an alternative to fossil fuel-driven vehicles.

Current Political and Economic Trends

China is currently the world's top cobalt consumer and has the largest automotive industry, thus has the highest demand for cobalt. China has recently announced that by 2025, 20% of all vehicles must use alternatives to fossil fuels.

As previously mentioned the main concern is that the demand for cobalt may exceed supply in the near future. Another contributing factor is that 95% of the cobalt mined worldwide is a by-product of copper and nickel. In recent years, these two metals dropped in price and as a result many mining companies have cut production which has contributed to the increasing cobalt deficit.

The fast rising demand of Cobalt could potentially damage the long-term availability of the resource. However, impressive results are being released from excavations that improve performance and provide profitable revenues in 2017.

Projected trends

The increasing demand of cobalt is outpacing the increase in supply, predicting a deficit in the next five years. The global demand for cobalt is projected to grow at a compound annual growth rate (CAGR) of 11.6% over the next 10 years. In 2018, the total supply required to meet the global demand is 105,000 tonnes. According to MacQuarie Bank, the cobalt deficit will be 885 tons in 2018, more than 3,200 tons in 2019 and over 5,300 tons in 2020.

Projected Product Trends

An important factor to consider will be whether companies bypass the supply chain and go directly to the source. The most successful auto companies with regard to maintaining a long-term supply will be the ones that purchase the cobalt and supply it to their battery manufacturers. Apple, the world's largest end user of cobalt, is to follow suit and are currently in talks to buy metal directly from miners.

As the electric vehicle revolution continues, prices will increase as supply restrictions increase, projecting a cobalt deficit in 2022/2023 when the larger adoption of electric vehicles is predicted to occur.

In 2020, expected battery consumption will account 60% of global cobalt demand. The increase in battery usage is mainly driven by the electric car revolution. The largest and fastest growing end-use of cobalt is the rechargeable battery segment and the lithium-ion battery used in the electric vehicle industry is a key driver.

Projected Political and Economic Trends

Currently, around 65% of the world's cobalt resources lie in the Democratic Republic of Congo (DRC). This is the greatest challenge facing cobalt supply due to the political instability in the DRC. Many mining companies are now turning to North America as opposed to the DRC to develop alternative and more ethical mining operations.

Two major DRC projects are scheduled to open supply and mitigate price increases. In 2018, Glencore is reopening the Katanga mine, aiming to produce 22,000 tones per annum, constituting 20% of global production. Any delay would most likely cause prices to increase further. Despite the new production by Glencore, prices should continue to increase at a stable rate over 2018.

Conclusion

Cobalt prices will continue to increase due to the increasing demand and constraints on supply. Low prices of copper and nickel, and political instability in the DRC are currently the main cause of supply limitations. Although currently the dominant cobalt supplier, the instability in Congo will drive consumers to source elsewhere for cobalt. Technology is continuously developing and one should keep in mind that should battery technologies be developed that could limit or eliminate the use of cobalt, the position of cobalt in the auto industry will decline.
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