Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Cobalt hydroxide prices have plummeted due to an upsurge in supplies from the Democratic Republic of Congo.
The compound used to make chemicals for EV batteries is a byproduct of copper, and prices are usually cited as a percentage of the metal price, known as payables.
According to Benchmark Mineral Intelligence, payables in August dropped to 46% of the cobalt metal price, compared with around 90% in late 2021 and early 2022 when cobalt metal traded around $60,000 a metric ton. Cobalt is currently trading around $32,000 a ton.
“We’re unlikely to see prices return to 2022 levels until demand is able to catch up with the huge volume of cobalt available at the moment,” said BMI analyst Roman Aubry, who expects a cobalt market surplus of 17,000 tons this year.
“However, given the rate at which the EV industry is progressing, we expect demand to substantially overtake supply in 2027.”
Soaring production from Indonesia, where cobalt is a byproduct of nickel, is also adding to surpluses.
BMI estimates cobalt supplies from Indonesia will more than double to above 19,000 tons this year from last, while those from the DRC will rise more than 14% to 169,000 tons or 72% of the global total at nearly 223,000 tons.
Congo supplies have been boosted by the resumption of cobalt and copper shipments from the Tenke Fungurume mine (TFM) in July, after a one-year stoppage caused by a dispute with the government.
TFM produced 18,501 tons of cobalt and 209,120 tons of copper in 2021.
Another headwind is the shift to cheaper lithium iron phosphate (LFP) batteries, moving away from those that use nickel, cobalt and manganese (NCM) cathodes.
“These developments pose long-term challenges to cobalt demand,” analysts at Morgan Stanley said in a note.”
(With files from Reuters)
