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Column: Cobalt Holdings bets the battery metal’s fortunes have turned
The cobalt market is witnessing a transformative phase, marked by a significant decline in prices that has even led artisanal miners in the Democratic Republic of Congo (DRC) to step back from production. This downturn has been exacerbated by surging outputs from formal mining operations in the DRC and an influx of cobalt from Indonesia, resulting in a market characterized by oversupply despite a notable rise in global demand.
Investors, however, are seeking opportunities amid the turbulence. Cobalt Holdings, for instance, is poised to raise $230 million through an IPO in London, intending to purchase physical cobalt from industry giant Glencore. CEO Jake Greenberg anticipates that this procurement will occur at a low point in the price cycle, presenting a potential investment opportunity for those looking to benefit from a future rebound in cobalt values.
Cobalt Market Dynamics: Turbulent Waters Ahead
The DRC, which is the largest global producer of cobalt, recently enacted a four-month export ban to address the oversupply situation. This proactive measure signifies the government’s recognition of production limits and its potential commitment to stabilizing prices. Moreover, cobalt’s pricing history showcases a volatile pattern; previous surges in production have led to varying price cycles, yet the current scenario indicates a contraction in artisanal mining activity due to affordability concerns.
Analysis by Benchmark Mineral Intelligence (BMI) indicates a fundamental shift in cobalt production, attributed primarily to China’s CMOC Group, which has more than doubled its output to record levels. Despite this surge, the country faces challenges as the government deliberates on future export restrictions once the ban lapses. Stakeholders remain watchful as comments from government authorities suggest any easing will likely align with tightening controls to achieve market equilibrium.
Demand Growth Amidst Supply Challenges
Despite a cloudy supply landscape, cobalt demand is projected to grow robustly, propelled by its vital role in electric vehicle (EV) batteries. BMI’s annual report suggests that demand soared by 14% year-on-year in 2024, with anticipation that production will begin to lag behind demand as we approach the 2030s. Yet, a shift in battery chemistries, especially among Chinese manufacturers pivoting away from cobalt, poses challenges to its market share.
While Western automakers continue to adopt cobalt-heavy battery technologies, the overall battery market presents a battleground with fluctuating preferences. Cobalt’s future hinges not only on EV demand but also on the evolving landscape of battery production methodologies. Competing battery formats, such as lithium-iron-phosphate (LFP), may further disrupt traditional cobalt usage.
The Strategic Element of Cobalt Holdings
Cobalt Holdings is capitalizing on decreasing cobalt prices, joining other entities, including China’s state stockpiler, in efforts to consolidate cobalt supplies. The National Development and Reform Commission of China received substantial cobalt shipments in 2024, effectively shrinking the existing supply surplus but still indicating a disparity between Eastern stocks and Western shortages.
Cobalt Holdings aims to establish a strategic inventory of cobalt, thereby reducing reliance on Chinese supply chains for this critical mineral. This move could serve as a significant counterbalance in the ongoing competition for access to critical minerals necessary for high-tech industries.
The Future of Cobalt: A Long Wait for Recovery
While current conditions present a bleak outlook with abundant cobalt supplies, future market dynamics could eventually lead to a resurgence in prices. The balance of supply and demand will remain a critical factor, especially if major producers like the DRC take concerted steps to mitigate overproduction.
Investors keen on reaping benefits from the cyclical nature of cobalt may need to exercise patience. The impending market developments may signal a turning point, but it remains uncertain how long cobalt’s journey from a slump to recovery will take.
With geopolitical tensions and strategic interests intertwining in the cobalt supply chain, the stakes are high for miners and investors alike as they navigate the complexities of this crucial market.
