Cobalt Market Update: Q2 2024 in Review

While cobalt metal prices remained muted in Q2, Cook noted that there is a growing price discrepancy between the value of cobalt metal, or standard-grade material, and alloy-grade material.

The spread between alloy-grade and standard-grade cobalt has widened to its largest point since 2009. Strong demand from the US aerospace sector has created a premium for approved aerospace brands amid supply tightness, he noted.

“We are seeing alloy grade at a premium,” Cook told the audience at the Fastmarkets event. “The main demand source at the moment is aerospace demand, and military defense applications as well.”

Additionally, a 25 percent US tariff on Chinese cobalt metal is somewhat restricting long-term imports. While some have opted to pay the tariff, Cook sees that trend as unsustainable.

He also highlighted a discrepancy between low standard-grade and high standard-grade prices. Supply disruptions for some western brands have created a small premium, with deals clustering around the higher end of the range. The rapid expansion of production capacity for Chinese brands has increased their availability, further widening the range.

Oversupply creating cobalt price pressure

Last year, global cobalt mine supply jumped 16.75 percent year-over-year, rising from 197,000 tonnes in 2022 to 230,000 in 2023. Both the DRC and Indonesia saw significant production increases, with the DRC's output climbing from 144,000 tonnes in 2022 to 170,000 in 2023 — that amounts to 74 percent of global supply. Indonesian production grew from 9,600 tonnes to 17,000 tonnes during the same timeframe, making up 8 percent of supply.

With higher mine output from the DRC and Indonesia, and increased refinery production in China, Fastmarkets is forecasting a 10,000 tonne surplus for 2024, which will add to price headwinds. This despite China’s State Reserve Bureau (SRB) making a strategic cobalt acquisition of 15,000 tonnes for delivery by the end of the year.

“Initially the (stockpiling) provided a boost to standard-grade prices; (however), the low end has since fallen to levels seen before the SRB purchase,” explained Cook. Moving forward, the SRB's 15,000 tonne acquisition could be offset by heightened production in China through the second half of the year.

Elsewhere, high copper prices are likely to keep cobalt by-product production in the DRC at elevated levels.

Indonesian cobalt supply is the result of high-pressure acid leaching (HPAL), a process used to extract nickel and cobalt from laterite ore bodies. Fastmarkets expects this space to grow significantly in the next decade.

“An increase in Indonesian HPAL capacity will more than double its share of cobalt mine supply by 2028," said Cook. “Indonesia will account for 19 percent of mine supply by 2028.”

With this increased production in the DRC and Indonesia, Fastmarkets anticipates that the market will take in an additional 52,000 tonnes of cobalt supply by 2028.

On the demand side, the battery segment will continue to drive growth. In 2023, batteries accounted for 73 percent of global cobalt demand, and according to Fastmarkets, demand from the sector is projected to rise at a CAGR of 12.5 percent between 2023 and 2028. This increase will boost the battery sector's share of demand to 81 percent.

In contrast, demand growth from superalloys and other sectors is expected to be much lower. These segments have estimated CAGRs of 4.4 percent and 2 percent, respectively.

Low prices weighing on western cobalt supply

Outside the DRC and Indonesia, cobalt mines have been impacted by weak prices.

“Those low prices that we've seen have really started to threaten the development of western cobalt capacity,” said Cook.

“Already over the last 12 to 18 months, we've seen a US cobalt mine having to be shuttered because of the low price environment — the breakeven cost is far higher than the market price," he added.

In April, cobalt- and nickel-focused Jervois Global (TSXV:JRV,ASX:JRV,OTCQB:JRVMF) suspended final construction and full concentrator commissioning at its Idaho Cobalt Operations (ICO).

“ICO’s mineral resource and reserve is the largest and highest grade confirmed cobalt orebody in the US and when commissioned will represent the country’s only primary cobalt mine supply,” the company said.

“Jervois has determined that not mining ICO cobalt at cyclically low prices, will preserve the optionality and inherent strategic value of ICO for shareholders and key stakeholders including local communities and the State of Idaho. The company also views not mining ICO at current prices is consistent with US Government critical mineral policy objectives.”

ICO isn't the only cobalt endeavor that has sidelined by a changing environment.

In late June, BASF (OTCQX:BFFAF,FWB:BASF) decided against a US$2.6 billion investment in a nickel and cobalt refinery. Although the move was largely attributed to increasing global availability of nickel, cobalt will be affected too.

BASF initially announced the plan with Eramet (EPA:ERA) in 2020, and the refinery project was expected to output 42,000 tonnes of nickel and 5,000 tonnes of cobalt annually for BASF.