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Cobalt's Unexpected Plunge Shocks Global Market

  • Cobalt prices reached record lows due to an oversupply, primarily stemming from a stockpile created during a lengthy ownership dispute in the DRC.
  • The demand for cobalt has decreased with falling EV sales in Europe and China, and as battery production shifts to cobalt-free chemistries.
  • Analysts are divided on the future of cobalt, weighing its benefits in extending battery life against the appeal of cheaper, cobalt-free alternatives.
Cobalt

Via Metal Miner

Analysts once hailed cobalt as a commodity whose price would rise forever. Used in the cathodes of many lithium-ion batteries to extend the life of the battery cell, investors and mine operators eagerly anticipated high returns on all cobalt investments. However, cobalt prices recently dropped to record lows amid global oversupply and a widespread slowdown in the battery market. Suddenly, those same traders and mine companies are scratching their heads.

Most of the world’s cobalt supply originates from the Democratic Republic of the Congo, an impoverished sub-Saharan African country. The people there widely believe cobalt mining is the key to a better future. As a result, they will risk their lives to mine it. Indeed, a quarter of the cobalt mined in the DRC comes from “artisanal mining” where miners use their hands and simple tools to extract the metal from the Earth. In turn, mine collapses that trap miners underground are common. Those who survive the mining process often go on to sell the metal ore they collect to Chinese brokers who siphon off most of the profit. 

DRC Behind the Cobalt Surplus

The past year saw mines in the DRC entangled in a lengthy ownership dispute. Indeed, the DRC’s poor establishment of property rights, combined with the aforementioned problems in the sector, led to a dispute that took almost a year to resolve. During the dispute, cobalt exports halted, but mining and production continued. Before long, a large stockpile of cobalt began to grow.

In April of this year, export restrictions lifted, and the stockpile flooded the global marketplace. Sellers tried to ease the metal into the market slowly to avoid a collapse in prices, but to little avail. In the end, the stockpile that built up over the year proved too much for the market to handle, and prices soon tanked. As if that weren’t enough, cobalt is also produced as a byproduct of zinc and nickel mining. This means suppliers can’t cut back on production to counter the global oversupply.

EV Sales Down Alongside Cobalt Price Index

As enormous oversupply batters the global cobalt price, a large-scale slowdown on the demand side has created something of a “perfect storm” for the once sought-after metal. The battery market recently began cooling from the post-pandemic boom that sent prices for battery raw materials skywards throughout 2021 and 2022.

Meanwhile, EV sales in Europe and China continue to fall. In the United States, consumers required price cuts and tax breaks to continue purchasing electric cars. Personal electronic devices like laptops and smartphones have also seen reduced global sales due to higher interest rates. But not only is global battery production slowing down, new types of batteries continue to require less and less cobalt. In fact, many manufacturers and users are shifting to cobalt-free chemistries like lithium iron phosphate and lithium manganese oxide. Tesla is just one of many battery users aiming to rid its products of any trace of cobalt.

Analysts Agree Cobalt Could Go Either Way in 2024

Do cobalt-containing batteries deserve a second look now that the cobalt price has hit rock bottom? After all, cost is what originally drove producers away from cobalt-containing batteries, alongside bad press stemming from the humanitarian concerns inherent to cobalt mining. The answer? It depends on how you’ll use the battery.

Cobalt-containing batteries may very well deserve a second look because cobalt plays an important role in extending the life of a battery. This makes lithium-ion chemistries like NCA or NMC appropriate for durable, sustained use. But as cobalt-free alternatives become available, users must ask themselves whether cobalt-containing batteries are really worth it, especially considering that the battery chemistries also rely on other historically pricey components like nickel and manganese.

Are cobalt’s best days in the past? Cobalt wouldn’t be the first metal to fall to the sidelines after massive excitement, nor would it be the first to rebound after a major crash. As we enter 2024, we’ll be watching the cobalt price index very closely.

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By Daniel Julius

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