EU cobalt prices stabilise after SA disruptions

Cobalt prices in Rotterdam stabilised this week as operations at South Africa's Durban port returned to normal and buying interest slowed in China and Europe.

Prices for alloy and chemical-grade cobalt were assessed slightly lower yesterday at $24.50-25.20/lb du Rotterdam, down from $24.50-25.50/lb du Rotterdam on 27 July as spot demand fell. Several small-volume deals were done within the assessment range, for chemical and alloy-grade metal, but larger bookings have all but disappeared.

Recent civil unrest around Durban — a key cobalt export route — had sparked Chinese interest in hydroxide and metal over the past two weeks, with buyers fearing potential shortages. But producers and traders received few enquiries this week, indicating that supply concerns are easing now that Durban port operations are returning to normal. Some are still experiencing delays as food and medical imports are prioritised at the port, but bottlenecks are steadily being worked through.

Some traders this week have been happy to lock in profits on small volumes and lower offer levels in order to secure deals, but most are holding back — keeping larger volumes in stocks in anticipation of higher prices in September when spot demand is usually strong ahead of the fourth quarter.

Medium-term headwinds emerge

The long-term demand outlook for cobalt remains strong, but growing interest in cobalt-free batteries and new supply might temper price gains in the coming years.

Electric vehicle (EV) demand in the first half of 2021 was strong in China and Europe. In China, 1.206mn EVs were sold in the first half of 2021, up by 201.5pc from the first half of 2020 when Covid-19 lockdowns were being rolled out globally. In Europe, sales of EVs made up 15pc of the region's automotive market in the first half of 2021 at just over 800,000. Sales in China and Europe are expected to increase in July-December, boosting demand for cobalt in batteries.

In order to fulfil this demand, Glencore — the world's largest cobalt producer — has partially re-opened its largest mine, Mutanda in the DRC. Mutanda accounted for 1,100t of the 11,900t produced by Glencore in January-June. The company has also increased its 2021 cobalt production guidance to 32,000-38,000t — a wider range than the 33,000-37,000t guidance issued earlier in the year.

If Mutanda fully re-opens next year, Glencore's output could return to levels similar to 2019 — 46,300t or more — particularly now that its Katanga operation has fully ramped up. The timeframe for Mutanda's return will have a major impact on global cobalt prices — metal and hydroxide — in the next couple of years. A quick ramp-up or high capacity utilisation could put the brakes on any demand-driven price rises, while a slower or delayed ramp-up could leave the market in a deficit.

Meanwhile, technological developments could weigh on cobalt prices in the next few years. Cobalt-free batteries are starting to proliferate in China, with Svolt starting to offer nickel-manganese (NMX) cathode batteries last week and BYD's non-cobalt lithium-iron-phosphate (LFP) blade battery adopted in all of its vehicles last week.

CATL — the world's largest battery cell producer — announced the first commercial sodium-ion battery yesterday. In addition to requiring no cobalt, this battery requires no lithium either, making it significantly cheaper to produce. CATL — which supplies automakers including Tesla and Volkswagen — said it aims to establish a scaled-up supply chain by 2023.

The new battery is lower in energy density than even LFP batteries, suggesting its uses may be limited and that NCM/NCX batteries will continue to dominate for more powerful vehicles.

By Thomas Kavanagh