Prices for cobalt metal continued to contract in Q2 on the back of oversupply. Meanwhile, values for alloy-grade cobalt saw some growth due to increased demand in the aerospace and defense sectors.

Starting the 90 day session at US$28,551.80 per tonne, prices for cobalt metal shed 4.93 percent through Q2, ending the period at US$27,143.90. “that increased production in the Democratic Republic of Congo (DRC), Indonesia and China outpaced demand growth and impeded price momentum.

Reiterating that point in a July report,  that China’s CMOC Group (OTC Pink:CMCLF,SHA:603993) produced 54,024 tonnes of cobalt metal in the first half of the year, in DRC, achieving 83 percent of its annual guidance of 60,000 to 70,000 tonnes. This surge, which added to an already oversupplied market, was reportedly driven by the expansion of CMOC’s TFM mine, along with increased monthly output at the KFM mines in the DRC.

Oversupply creating cobalt price pressure

Last year, global cobalt mine supply jumped 16.75 percent year-over-year, rising from 197,000 tonnes in 2022 to 230,000 in 2023. Both the DRC and Indonesia saw significant production increases, with the DRC's output climbing from 144,000 tonnes in 2022 to 170,000 in 2023 — that amounts to 74 percent of global supply. Indonesian production grew from 9,600 tonnes to 17,000 tonnes during the same timeframe, making up 8 percent of supply.

With higher mine output from the DRC and Indonesia, and increased refinery production in China,  It is forecasting a 10,000 tonne surplus for 2024, which will add to price headwinds. This despite China’s State Reserve Bureau (SRB) making a strategic cobalt acquisition of 15,000 tonnes for delivery by the end of the year. Moving forward, the SRB's 15,000 tonne acquisition could be offset by heightened production in China through the second half of the year.

Elsewhere, high copper prices are likely to keep cobalt by-product production in the DRC at elevated levels.

Indonesian cobalt supply is the result of high-pressure acid leaching (HPAL), a process used to extract nickel and cobalt from laterite ore bodies. that expects this space to grow significantly in the next decade.

On the demand side, the battery segment will continue to drive growth. In 2023, batteries accounted for 73 percent of global cobalt demand,  demand from the sector is projected to rise at a CAGR of 12.5 percent between 2023 and 2028. This increase will boost the battery sector's share of demand to 81 percent.

In contrast, demand growth from superalloys and other sectors is expected to be much lower. These segments have estimated CAGRs of 4.4 percent and 2 percent, respectively.

Low prices weighing on western cobalt supply

Outside the DRC and Indonesia, cobalt mines have been impacted by weak prices.

In April, cobalt- and nickel-focused Jervois Global (TSXV:JRV,ASX:JRV,OTCQB:JRVMF) suspended final construction and full concentrator commissioning at its Idaho Cobalt Operations (ICO).

“ICO’s mineral resource and reserve is the largest and highest grade confirmed cobalt orebody in the US and when commissioned will represent the country’s only primary cobalt mine supply,” the company said.

“Jervois has determined that not mining ICO cobalt at cyclically low prices, will preserve the optionality and inherent strategic value of ICO for shareholders and key stakeholders including local communities and the State of Idaho. The company also views not mining ICO at current prices is consistent with US Government critical mineral policy objectives.”

ICO isn't the only cobalt endeavor that has sidelined by a changing environment.

In late June, BASF (OTCQX:BFFAF,FWB:BASF) decided against a US$2.6 billion investment in a nickel and cobalt refinery. Although the move was largely attributed to increasing global availability of nickel, cobalt will be affected too.

BASF initially announced the plan with Eramet (EPA:ERA) in 2020, and the refinery project was expected to output 42,000 tonnes of nickel and 5,000 tonnes of cobalt annually for BASF.

• [Editor:admin]