Viewpoint: Smelters continue to chase cobalt supply

After an unprecedented year in 2020, the cobalt market will likely continue to actively seek raw materials this year in anticipation of supply constraints and higher demand from the electric vehicle (EV) sector.

Covid-19 lockdowns reduced mining and shipments of cobalt hydroxide from the Democratic Republic of Congo (DRC) and South Africa in the first quarter of last year and suspended mining in April-May. Availability has tightened since August on a slower-than-expected recovery in shipments and logistics services.

This sent cobalt hydroxide prices up to $12.20-12.90/lb on 8 December, from $9.70-10.50/lb on 7 January.

Domestic US dollar prices for cobalt metal in China were at $17.91-18.25/lb ex-works on 7 December, and at a premium to their EU and US counterparts, because of higher demand from chemical producers looking to fill potential hydroxide shortfalls.

But prices for cobalt metal in Europe and the US remained in a holding pattern over the final few weeks of 2020. European prices for 99.8pc alloy and chemical grade material were stable at $15.60-16.10/lb from 24 November.

And prices in the US have been relatively steady since September, standing at $15.20-16.20/lb fob US warehouse on 3 December. While prices in the west have been stable, China has seen a scramble for long-term cobalt supply that has raised metal and hydroxide prices.

Cobalt consumers and traders have been taking measures to secure raw materials through direct investments or yearly contracts, and uncertainty brought on by the pandemic is still hanging over shipments and mining operations in the DRC and South Africa.

Chinese copper producer Wanbao Mining in November launched the second phase of its Kamoya copper-cobalt mine in the DRC. The second phase, with processing capacity of 990,000 t/yr, has smelting capacity of 2,000 t/yr for cobalt hydroxide, which is converted into cobalt metal, and 25,000 t/yr for copper metal.

In December, Glencore extended its agreement with Chinese battery material manufacturer Green Eco-manufacture to supply around 150,000t of cobalt hydroxide in 2020-29.

China imported 234,097t of cobalt intermediates produced through the hydrometallurgy process in January-October, down by 0.6pc on the year, with January-October imports of cobalt concentrates down by 44.8pc to 45,559t.

Hydroxide has become the driving force behind the cobalt market. Demand from other markets such as aerospace and medical alloys has taken a large hit from the pandemic and will be slow to recover in 2021, but demand for use in EVs remained robust and is expected to grow quickly this year.

Accelerating EV sector demand

Global demand from the EV sector inside and outside China has accelerated, driven by governments' green economic recovery policies and consumer demand.

China's new electric vehicle (NEV) industry accelerated its activity in the second half of last year to cover the losses caused by Covid-19 in the first half. The country's 2020 NEV production is expected to be over 1mn units, with output for the first 10 months having totalled 914,000 and NEV producers ramping up output in November-December in an attempt to meet their annual targets.

In Europe, EVs could account for 10pc of European car sales by the end of 2020 — up from just 2.5pc in the first quarter — and climb to a 20pc share by 2025, according to the European Federation for Transport and Environment.

South Korea's trade, industry and energy ministry plans to invest 73.4 trillion won ($67.7bn) in energy initiatives as part of its "New Deal" programme. Part of this plan involves expanding charging infrastructure in the country, with the aim of having 14mn EVs and 200,000 hydrogen cars on the road by 2025.