Cobalt price to rise, supply tighten as China snaffles a third of the world’s supply
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China’s huge deal to secure the lion’s share of global cobalt could have a big impact on ASX-listed cobalt producers.
The deal will see GEM — a $4.6 billion company listed on the Shenzhen stock exchange — buy 50,000 tonnes of cobalt from Swiss miner Glencore over the next three years.
The deal had “massive real-world implications for the availability of cobalt and for pricing”, according to an analysis by InvestorIntel.com.
Scroll down for a list of 50 ASX stocks with exposure to cobalt.
“Even 52,000 tonnes over three years sucks about one-third of the world’s supply of cobalt out of the market, an amount that can’t help but drive up the price.
“Expect the multi-year bull market in cobalt to continue. Expect to see similar but smaller announcements from other multinationals.”
It’s good news for ASX-listed cobalt stocks if global supply comes under pressure.
Cobalt is in high demand because of its use in rechargeable batteries for electric cars. One billion electric cars are expected to be on the road by 2050 and cobalt demand is expected to grow eight-fold by 2025.
ASX cobalt stocks have performed strongly over the past 12 months — with some up as much as 700 or 800 per cent.
The standout has been NSW-focused nickel and cobalt miner Collerina Cobalt (ASX:CLL) — which has also benfitted from HPA production. Collerina is up 800 per cent over the past 12 months.
Jervois Mining is not far behind with a 736 per cent gain.
Other big cobalt winners include Australian Mines, Riedel Resources and Cobalt Blue.
White Cliff Minerals (ASX:WCN) this week started an initial 3000m drilling program at its Coglia Well cobalt and nickel project 70km south-east of Laverton in Western Australia’s north-eastern goldfields.
Here is a list of 50 ASX-listed stocks with exposure to cobalt:
The Glencore deal locks in China’s position as a market leader in the manufacturing of electric car batteries globally — given that it already produces more than 80 per cent of the world’s refined cobalt.
Prices for the metal have doubled over the past two years as electric vehicle manufacturers scramble to secure adequate supplies.
There’s a similar race to lock in supply for lithium — Australia is one of the world’s biggest suppliers — although a recent report by Morgan Stanley said increased global lithium supply will see prices fall by 45% by 2021.
GEM said increasing levels of demand meant the use of recycled cobalt metal in battery production was no longer adequate.
The company is the main cobalt supplier to Chinese batter maker CAML, which recently announced that it’s now the largest battery supplier in the world.
The total value of deal was not disclosed, but GEM will receive 13,800 tonnes in year one — increasing to 21,000 in 2020.
The FT reports that more than half of the world’s cobalt supply is mined from the Democratic Republic of Congo (DRC), and Glencore is the world’s biggest producer.
The second largest is China Molybdenum — dual-listed in Hong Kong and Shanghai — which purchased the Tenke Fungurume mine in the DRC for $US2.65 billion in 2016.
Glencore’s cobalt mining capacity in the DRC will increase from in around 40,000 tonnes in 2018 to more than 60,000 tonnes next year.
Around 10 kilograms of cobalt is used in the production of an electric car battery — compared to around 10 grams for an iPhone.
Additional reporting from Business Insider Australia.