In a significant shift, the prices of cobalt hydroxide, a vital component used in the production of chemicals for electric vehicle (EV) batteries, have experienced a steep decline. This sharp drop is attributed to an upsurge in supplies from the Democratic Republic of Congo (DRC), the leading producer of cobalt hydroxide.
Cobalt hydroxide is primarily produced in the DRC as a byproduct of copper mining. Traditionally, hydroxide prices are referenced as a percentage of the metal price, known as payables. According to Benchmark Mineral Intelligence (BMI), payables in August plummeted to 46 percent of the cobalt metal price, in contrast to approximately 90 percent observed in late 2021 and early 2022 when cobalt metal was trading at around $60,000 per metric ton. Presently, cobalt is trading at approximately $32,000 per ton, Reuters news report said.
BMI analyst Roman Aubry mentioned, “We’re unlikely to see prices return to 2022 levels until demand is able to catch up with the huge volume of cobalt available at the moment.”
He predicts a cobalt market surplus of 17,000 tons for this year. However, he also anticipates that the electric vehicle industry’s rapid growth will cause demand to substantially surpass supply by 2027.
The surplus has been exacerbated by soaring production from Indonesia, where cobalt is a byproduct of nickel production. BMI estimates that cobalt supplies from Indonesia will more than double to over 19,000 tons this year compared to last year. Concurrently, supplies from the DRC are expected to increase by over 14 percent to 169,000 tons, constituting 72 percent of the global total, nearly reaching 223,000 tons.
The boost in Congo’s cobalt supplies is attributed to the resumption of cobalt and copper shipments from China’s CMOC Group’s Tenke Fungurume mine (TFM) in July. This resumption comes after a one-year stoppage caused by a dispute with the government.
While demand for cobalt is on the rise, it is not increasing as rapidly as the supply, partly due to sluggish sales of consumer electronics like mobile phones and laptops, which use cobalt-containing batteries. Additionally, the shift to cheaper lithium iron phosphate (LFP) batteries and a move away from nickel, cobalt, and manganese (NCM) cathodes to enhance driving range has led to a reduction in cobalt content.
Analysts at Morgan Stanley emphasize that these developments present long-term challenges to cobalt demand. They foresee cobalt prices remaining under pressure due to supply growth and CMOC’s destocking.
Morgan Stanley’s projections for the cobalt market indicate surpluses of 47,061 tons in 2023, 74,800 tons in 2024, and 92,660 tons in 2025. This data sheds light on the evolving dynamics of the cobalt market and its implications for the EV battery industry in the years to come.