Cobalt Market Update: Q2 2023 in Review

How did cobalt prices perform in Q2?

Cobalt prices rallied from the end of 2020 to the beginning of 2022 on the back of strong demand from the electric vehicle sector. The portable electronics segment also saw increased demand during the coronavirus pandemic, but increased supply paired with sluggish demand has put pressure on prices since June last year.

The first quarter of 2023 saw cobalt continue to drop from the highs seen in 2022, with prices subdued throughout much of Q2. Furthermore, cobalt sulfate and hydroxide prices hit a historic low in the first half of May, according to data from Benchmark Mineral Intelligence.

“Cobalt metal prices were a bit slower to erode, largely due to the non-interchangeable nature of much of the metal specifications traded in Europe and the US,” Roman Aubry of Benchmark Mineral Intelligence told the Investing News Network (INN).

“Since the market has been, and indeed still is, fundamentally in oversupply, we had considered price erosion in Q2 to be inevitable,” Aubry said. “However, a slight rebound in midstream demand from the battery industry in June and severe logistical constraints stemming the flow of product out of the Democratic Republic of Congo (DRC) helped to establish a floor by mid-June, enabling a firm correction towards the end of the quarter.”

One of the biggest news in the cobalt space so far this year has been the Chinese State Reserve Bureau's purchase of over 5,000 metric tons of cobalt metal at a time where prices are at lows.

“It has been quite significant news due to the scale of the tender,” Aubry said. “In terms of direct impact on the cobalt market, it is unlikely to cause any major changes in pricing; however, the timing of the purchase will likely help already rising prices continue their trajectory and stay firm for longer.”

Commenting on the impact of the news on the cobalt market, Jack Bedder of Project Blue told INN the move has helped bring about some price recovery. At the same time, dynamics in the intermediates market have also supported prices and caused intermediate payables to recover a little.

“On a short-term basis, intermediates are tight in China, with major producers in the DRC looking to satisfy long-term contracts before offering spot,” he said.

What's ahead for the cobalt market in 2023?

As the second quarter of the year continues to unfold, there are a few catalysts investors interested in the cobalt space should watch out for.

For Bedder, China’s stuttering recovery is perhaps the biggest barrier to stronger demand in the second half.

“We expect prices to recover further in H2, supported by stronger demand, strong demand for intermediates in China and the removal of metal from the market,” he said. “But the market remains in oversupply (intermediates) and well supplied in terms of metal and chemicals, so we don’t expect prices to move up too much.”

Based on current sentiment, cobalt prices look set to rise through July and potentially even August before stabilizing towards the end of Q3, according to Benchmark Mineral Intelligence.

“On the chemical side, it is likely that spot availability remains tight in the DRC with urgent spot purchases attracting meaningful premia,” Aubry said. “On the metal side, China’s stockpiling practice through H2 coupled with robust military and aerospace demand is likely to lend price support in Europe and the US.”

The main catalyst to watch out for in Q3 is logistical issues in the DRC and how they could continue to impact cobalt supply.

“There are external factors that are leading to this bottleneck that may improve or worsen independently of the cobalt market and weigh on prices,” Aubry said. “Additionally, we see copper exports being prioritized over cobalt as copper prices continue strong. Were there to be a change in copper prices, we could see a greater volume of cobalt being exported from the country and reaching Durban.”

In the long term, Benchmark Mineral Intelligence still sees NCM being the main battery chemistry for EVs, driven mainly by its currently unmatched performance and density.

“However, cobalt-free lithium-iron-phosphate batteries have been gaining momentum, and as a result we’ve had to temper our expectations for the cobalt demand forecast,” Aubry said.

Within NCM chemistries, higher nickel content and lower cobalt will also remain a trend.

“(This will weigh) on cobalt demand long term, though the sheer scale of the growth of EV and battery demand is more than enough to offset this reduction of cobalt in batteries we’re seeing long term, and we still expect cobalt demand to rise over time,” Aubry added.