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Surging supplies of cobalt from Indonesia and Africa are forecast to outpace demand from electric vehicles, generating large surpluses over the next few couple of years which will keep prices of the metal under pressure.
Throwing the spotlight on the deteriorating outlook was London-listed miner Glencore, which last week said it would consider adding to its cobalt stockpiles and cut production to support cobalt prices.
Global cobalt supplies last year are estimated at nearly 190,000 metric tons with the surplus at around 10,000 tons.
Prices of cobalt metal, also used in superalloys for jet engines, sank to two-year lows below $15 a lb in May, a drop of 65% from May 2022 when the market started to price in the coming glut.
Traders say the small cobalt price upturn since May to around $17 a lb is due to supply chain restocking and some tightness in superalloy grade material.
Adding to new mine supplies will be those from China’s CMOC Group Tenke Fungurume mine (TFM) in Democratic Republic of Congo (DRC), the world’s largest producer, after a one-year stoppage caused by a dispute with the government.
“The market is bracing itself for the release of over 15,000 tons of cobalt in hydroxides from CMOC’s Tenke Fungerume mine,” said Macquarie analyst Jim Lennon.
Lennon expects cobalt surpluses to amount to 8,600, 10,200 and 10,400 tons this year, in 2024 and in 2025 respectively.
“In total, there are a large number of DRC mine projects which could add 50,000 tonnes a year to supply by 2027.”
If plans by mainly Chinese firms to increase capacity in Indonesia are executed successfully, Macquarie reckons cobalt supplies from the world’s second largest producer will jump to 83,800 tonnes in 2027, more than 30% of the total from 10% in 2022.
On the demand side, China’s electric vehicle industry switching away from nickel, cobalt and manganese (NCM) chemistry to cheaper lithium iron phosphate (LFP) batteries, means cobalt demand will not grow as rapidly as previously expected.
“To some extent substitution and the move to higher nickel and lower cobalt batteries (to boost the driving range) has been offset by higher electric vehicle sales,” said Bank of America analyst Michael Widmer.
(By Pratima Desai; Editing by Susan Fenton)
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