Cobalt Prices Explained

Cobalt prices posted a bearish outlook as the market experienced thin demand and oversupply which led to piling inventory. Additionally, the slow growth of electric vehicle industries (one major consumer of cobalt for their battery production), particularly in the U.S. and European markets, will further upset its prices.

Why are cobalt prices fluctuating?

1. Differences in EV Production Inputs

Cobalt’s marketability largely depends on the EV sector. According to Cobalt Institutes’ quarterly report, cobalt’s consumption spiked by over 60% in the last 2 years due to the 56% increase in sales of new energy vehicles.

However, this promising growth rate was cut short when China, (the largest and fastest-growing cobalt consumer and the leading producer of EVs and plug-in hybrids) shifted its gear to non-cobalt battery production. Additionally, some automakers replaced cobalt with cheaper alternatives, leading to surplus inventory. Thus, the change in consumption in battery production greatly shapes cobalt prices.

2. Growing Supply

The growing supply currently offsets global demand as most cobalt-producing countries restarted their mining operations.

The Democratic Republic of Congo (the world’s number one producer) reopened its mining hubs with regulated rules including the artisanal mining sector after issues of human rights violation. Additionally, Indonesia (the second-largest producer) started its new generation of nickel plants which produce cobalt as a by-product.

While the EU and U.S. sanctions on Russia (the 3rd-largest producer) affect the European supply for a while, Australia (the 4th-largest producer) accommodates the supply deficit. Thus, the abundant supply of this metal creates cobalt price variation.

3. The U.S. and Europe Supply Chain

The U.S. and European countries pioneered the production of EVs that need cobalt to complete production. However, these countries mostly rely on battery cell imports from China (which holds the largest global hub of cobalt processing and refining, producing 75% of global metal and cobalt salt).

While trading relationships among these tech giant countries still flow regardless of import-export sanctions, the U.S. and EU are vocal in finding cobalt-producing country alternatives to invest and localize their cobalt supply.

Overall, the U.S. and EU need to fill in their manufacturing capacity to even the structural advantage of China, potentially causing a spike in cobalt prices.

Which variables impact the price of cobalt?

• Differences in EV ( electronic-vehicle ) Production Inputs
• Growing Supply
• US and Europe Supply Chain
• Production Cost
• Currency Fluctuation
• Government Policy

Where does cobalt come from?

Cobalt isn’t particularly rare as it’s the 32nd most common element. Generally, it is produced as a by-product at copper and nickel mines. This silvery-blue metal is common in China as part of its pottery glazes.

Georg Brandt’s interest in dark blue ore ( cobalt’s description before ) in a German local mining pit paved the way for cobalt’s discovery in 1730. However, this claim would remain an assertion for years as fellow chemists regarded it as a compound of iron and arsenic.

More than a decade later, Brandt’s theory proved to be true after further research about the metal. Cobalt production is divided into two main steps: mining and metallurgy.

1. Mining – The first step in cobalt production is to mine the ore. It’s done using various methods such as underground mining, surface mining, and open-pit mining. The specific method used depends on the type of deposit and the location of the mine.

The second step involves transporting the mined ore to a processing plant. The next method includes crushing and grounding the ore into a fine powder.

To create a slurry, water, and chemicals are mixed into the fine powder. Then, filtered through a series of flotation cells to separate the cobalt from other small particles.

2. Metallurgy – Another production method of cobalt is smelting. The purpose is to produce a cobalt-rich alloy output. This way involves refining the alloy to produce pure cobalt. The cobalt concentrate is smelted to produce a cobalt-rich alloy and these are the 2 steps:

Pyrometallurgy – A process which uses heat to extract cobalt from the alloy:

• First, melt the alloy in a furnace.
• Second, cool and solidify the molten alloy.
• Third, ground the solidified alloy into powder.
• Fourth, mix fluxing agents into the powder and heat it in a furnace.
• Lastly, remove the formed slag ( from alloy impurities ), leaving the pure cobalt powder.

Hydrometallurgy – A process which uses chemicals to extract cobalt from the alloy:

• First, dissolve the alloy in an acid solution.
• Second, precipitate the cobalt using a reducing agent.

What are the uses of cobalt?

Cobalts’ importance even became clearer in the 21st century as manufacturing for cutting-edge technologies for high-performance applications increased.

1. Battery Material – 40% of cobalt production directly goes to rechargeable battery materials such as lithium cobaltate for lithium-ion batteries and cobaltous oxide for nickel-metal hydride batteries.

These rechargeable batteries are useful in consumer electronics, electric vehicles, and grid-scale energy storage systems.

2. Steel – Cobalt’s corrosion-resistant properties make steel quality even more improved in wear and tear resistance, and cutting performance.

Its efficiency and flexibility in high melting and boiling points make cobalt-based alloy a prized item in the aerospace and modern military industries.

3. Medical Field – Cobalt’s role in the medicine industry is important as its radioactive isotope treats skin diseases and malignant tumors. Additionally, an appropriate amount of this metal in penicillin can improve its curative effect.

Whether global supply hits or misses its quota, these top cobalt-producing countries such as the Democratic Republic of Congo, Indonesia, Russia, Australia, and Canada maintain their production flow.

What is the future price of cobalt?

While Chinese EV manufacturing and abundant supply offset the marketability of cobalt prices, several current factors will move its value in an upward direction.

The increasing adoption of EVs – EV production will likely share its vehicle sales in the coming years. According to Bloomberg, EV sales are expected to reach 54% of global new car sales by 2030.

The growth of the energy storage market – Energy storage systems become increasingly important for storing renewable energy and providing backup power. Cobalt is used in the cathodes of lithium-ion batteries which are the most common type of battery used in energy storage systems.

China restocking – The country’s state stockpiler aims to buy 15,000 metric tons of cobalt metal from local Chinese producers over the next few months for domestic stockpiles. Also, the high-grade cobalt mining areas in the Democratic Republic of Congo attracted the attention of Chinese mining companies, signaling its international expansion.

Refined cobalt prices – The increasing prices of refined cobalt made experts predict that the commodity’s market will grow 15.8% year-on-year to 257,000Mt in 2024. Thus, cobalt prices will increase to $70,350 per ton in 2030.