X

Benchmark forecasts stronger cobalt prices going into 2020

share

The battered cobalt market could return to balance in 2021 — a lot earlier than expected — following well publicised production cuts by global major Glencore.

High cobalt prices, which peaked at about $US98,000 ($144,240) a tonne in early 2018, sparked an explosion in cobalt intermediate production in the DRC last year.

Cobalt stockpiles then accumulated over 2018/2019. These stockpiles have been pretty key in driving the subsequent price downtrend over the past year and a half.

In August, that changed when multi commodity giant Glencore announced plans to mothball the globally significant Mutanda mine in the DRC from the end of 2019.

Cobalt prices immediately responded. As of now, they look a lot less anaemic than they did two months ago.

That’s because Mutanda produced 27,300 tonnes of cobalt last year — about 20 per cent of global production, and enough for 2.5 million electric vehicles using today’s technology.

There’s a five-month window between the announcement and closure at the end of year. That means Glencore could reverse the decision — but it seems very, very likely to go ahead, says Benchmark Minerals Intelligence senior analyst Caspar Rawles.

“The information I have suggests that [Glencore] is already ramping down production,” he told Benchmark World Tour 2019 attendees in Perth.

“We expect the mine to be closed for about two years. In that time, cobalt demand will have grown enough that switching it back on won’t flood the market.”

Mutanda will join another of Glencore’s major cobalt operations, Katanga, on the sidelines.

In November last year, Glencore announced that 20,000 tonnes of cobalt hydroxide sales would be removed from the market until the third quarter of 2019 after it discovered low levels of radioactivity at Katanga. That’s now been pushed out to mid-2020.

Pre-Glencore supply cuts, Benchmark predicted the cobalt market would be oversupplied until sometime in 2022/2023. That picture has now changed.

This supply curtailment means the market will be eating into those hefty cobalt hydroxide stockpiles.

“In 2020 we think the market will be supplied from ongoing production and stockpiles, but from 2021 onwards there is a question about how well supplied the market will be,” Rawles says.

“And DRC supply is anything but certain. We could be looking at a tighter supply picture going forward than previous expected.”

That’s had a major impact on sentiment already. As part of his role, Rawles speaks to a lot of people in the supply chain – including large downstream buyers.

“In negotiations for next year’s annual supply contracts, cobalt producers have already asked for more favourable terms,” Rawles says.

“It looks as if we will have a higher priced environment going into 2020.”

Categories: Mining

share