OPINION - Cobalt’s 3 Month Price Hike a Sign of Things to Come?

Cobalt has seen wild price swings in the past — is this time different? Anthony Milewski of Nickel 28 Capital shares his thoughts.

This opinion piece was submitted to the Investing News Network (INN) by Anthony Milewski, who is an external contributor. INN believes it may be of interest to readers and has copy edited the material to ensure adherence to the company’s style guide; however, INN does not guarantee the accuracy or thoroughness of the information reported by external contributors. The opinions expressed by external contributors do not reflect the opinions of INN and do not constitute investment advice. All readers are encouraged to perform their own due diligence.


By Anthony Milewski, Chairman of Nickel 28 Capital

Following a 60 percent gain over the past three months, the price of cobalt has pulled back from a recent high of US$25 per pound to about US$21 as the market enters a profit-taking phase and in the absence of Chinese buying.

There is nothing unusual about this and doesn’t change the perceived view that the long-term macro trend is still up even if this involves micro zigzags within the upward trend. The critical battery metal has seen wild price volatility before, reaching a high in 2018 before plummeting to recent lows in 2020. But this time, there is reason to believe it’s different.

Previous price rallies have been predicated mainly on an approaching wall of anticipated future demand. However, soaring demand for these batteries’ use in electric vehicles (EVs) means we have now reached the point at which the price growth is based on actual demand and not projections and expectations like in the past.

As EV production edges closer to cost parity with legacy internal combustion engine-driven vehicles, demand growth is not expected to drop off any time soon. It’s also worth noting that EVs are not the only demand drivers. Cobalt is critical in developing superalloys for the aerospace and medical industries. While the COVID-19 pandemic had essentially scalped demand from the aerospace sector, this will become an added cobalt price booster once airplane manufacturing ramps up in a post-COVID economy.

While there is occasional hype around the idea that cobalt will be engineered out of batteries, the reality is that current and next-generation battery chemistries all rely on the metal to perform a crucial safety role. Put simply: cobalt stabilizes the cathode component of lithium-ion batteries, helping to ensure they do not catch fire. This is not something that battery manufacturers and end users want to take chances with. So, while Elon Musk has made big announcements about Tesla (NASDAQ:TSLA) and its partners designing a battery without cobalt, Tesla also signed a considerable five year cobalt supply agreement with Glencore (LSE:GLEN) last year.

Batteries may contain less cobalt these days, but in the future there will be considerably more batteries required, and thus the net amount of cobalt required will increase nevertheless.

Add to the mix renewed generalist investor appetite for mining and metals as a favorable asset class, and only a handful of dominant players in what is in fact a small market, and one essentially has a perfect storm underpinning the metal’s price trajectory over the foreseeable future.

While the price appears to be settling and at the higher level, perhaps around the US$20 level, it also seems to be setting a new base and a platform for continued growth. Where a previous base stalled around US$13 to US$15, the new base might likely settle around US$18 to US$21.

Another reason cobalt’s price trajectory is more sustainable this time is the focus on global economic recovery. With unprecedented stimulus programs being rolled out to establish a new global green economy in the wake of the COVID-19 pandemic, electrified transportation is at the heart of the new green reality. Also, in contrast to previous rallies, the world now has substantially larger battery manufacturing capacity — one that continues to grow exponentially. 

It’s also pertinent to mention that with the global vaccine rollout underway, there is a sense of renewed sentiment that could swiftly translate to a post-COVID economic boom in consumption. This in turn would feed into higher demand for the raw materials needed to manufacture the commodities people want, such as EVs.

There are also a number of factors that amount to a considerable level of vulnerability on the supply side. The metal is predominantly the co-product of copper production in the Democratic Republic of Congo (DRC), accounting for about 70 to 80 percent of global cobalt output.

However, the DRC presents a challenging environment to work in. Logistics remain a challenge, and political upheavals occur regularly. Further, reports of forced labor and child labor continue to taint the market for downstream applications. It is a sensitive subject, and while there’s no current indication that these things are about to impact the market, should any of them materialize and cause a sudden break in supply, it would be bullish in terms of cobalt pricing.

Then we have the geopolitics element to consider. The raw material is exported to China, which holds a dominant position when it comes to processing cobalt concentrates into usable materials for batteries. However, the country prioritizes these value-added chemicals for domestic use, leaving the rest of the world without reliable supplies.

As far as producers go, Swiss-based Glencore has in recent years become a dominant cobalt producer, accounting for about half the world’s cobalt production at full capacity in a market of about 140,000 tonnes. It has two sizeable cobalt mines in the DRC, one being Katanga, which can produce about 28,000 to 29,000 tonnes per year and is set to ramp up to 35,000 tonnes.

However, given the low copper and cobalt prices in late 2019, Glencore closed the mine and embarked on upgrading the facility. It has not yet guided an expected restart, and while such a sizeable addition to the small market might cause prices to drop once more, Glencore is unlikely to shoot itself in the foot by oversupplying the market. 

In short, cobalt’s price trajectory is based on more sustainable factors this time around. As the world increasingly focuses on electrifying transport and invests heavily in the new green economy, cobalt, along with other battery metals, is looking at a comfortable ride upwards.


About Anthony Milewski

Mr. Anthony Milewski has spent his career in various aspects of the mining industry, including as a company director, advisor, founder and investor.  In particular, he has been active in the commodities related to decarbonization and the energy transition, including nickel, cobalt, copper and carbon credits. Anthony has served on the London Metals Exchange Cobalt Committee, which includes representatives from the largest mining and commodities companies globally, to represent the interests of the industry to the board of directors the LME.

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Catch up and get informed with this week's content highlights from Charlotte McLeod, our editorial director.

Top Stories This Week: Powell Gets Fed Nomination, Using Gold in a Market Correction youtu.be

We're back after a break last week with quite a bit to cover in the gold space.

After running up past the US$1,860 per ounce mark midway through November, the yellow metal has taken a tumble. At the time of this writing on Friday (November 26) afternoon, it was sitting just under US$1,790.

Gold's losses this week have been attributed to elements like a stronger US dollar and better Treasury yields, although Jerome Powell's US Federal Reserve chair renomination has pulled other factors into play — some market watchers believe he may move to taper and raise interest rates faster than anticipated.


If the Fed follows its previously laid out timeline for tapering, it will wrap up in mid-2022; the central bank has said it won't raise rates until after that. It has also emphasized that its roadmap may change if necessary.

Looking at the larger picture for gold, I heard recently from Nick Barisheff of BMG Group, who believes the stock market is due for a major correction.

"The market is due for a major correction. What will cause it and when it will happen is anybody's guess — it could be tomorrow, it could be six months from now" — Nick Barisheff, BMG Group

It's impossible to know when this correction will happen, but Nick emphasized the importance of acting before it's too late. He pointed out that investors are typically slow to get out of the market once a crash actually begins — they wait for a turnaround, and by the time it's clear there won't be one, they've experienced big losses.

In his opinion, the solution is to get out of the stock market early and transfer money into gold.

Here's how Nick explained it:

"Instead of taking your money off the table and going into cash … you go to gold (because cash is devaluing daily). Gold will at least hold its own and probably appreciate … so by sitting it out in gold you can wait until the market finishes correcting and then buy back in" — Nick Barisheff, BMG Group

With gold's future in mind, we asked our Twitter followers this week what price they think the metal will be at the end of 2021. By the time the poll closed, most respondents had voted for the US$1,800 to US$1,900 range.

We'll be asking another question on Twitter next week, so make sure to follow us @INN_Resource or follow me @Charlotte_McL to share your thoughts.

Finally, in the cannabis space, INN's Bryan Mc Govern spoke with Dan Ahrens of AdvisorShares to get his thoughts on 2021 trends and what's ahead in 2022.

Dan was candid, and said if he had to choose one word to describe the cannabis market in 2021, it would be "painful." Like many others, he's been disappointed in the industry's performance — while positivity initially ran high due to excitement about potential federal changes in the US, ultimately progress has been slow.

"Cannabis started with a big run-up in January and February ... and things dragged from there" — Dan Ahrens, AdvisorShares

Still, Dan has hope for 2022 and said it will be a "huge year" for cannabis. He believes US reforms will come sooner rather than later, and in his opinion those widely anticipated changes will bring a wave of M&A activity.

Specifically, he expects to see alcohol, tobacco and other consumer packaged goods companies making deals with cannabis players, not just cannabis entities doing transactions with each other.

"Those big alcohol companies, tobacco companies, other consumer packaged goods product companies — they're waiting. They're waiting on the US" — Dan Ahrens, AdvisorShares

Want more YouTube content? Check out our YouTube playlist At Home With INN, which features interviews with experts in the resource space. If there's someone you'd like to see us interview, please send an email to cmcleod@investingnews.com.

And don't forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

cannabis plant layered with German flag graphic
Dmytro Tyshchenko / Shutterstock

Catch up on some of the biggest news of the week for the cannabis investment world.

Three political parties have formed a coalition in Germany, leading to a new government, and it has promised cannabis reform in the European nation.

Meanwhile, a popular cannabis retailer confirmed consumers will now find its products available for delivery on the Uber Eats mobile application in Ontario.

Keep reading to find out more cannabis highlights from the past five days.


Coalition of parties promises forward-looking cannabis policy

Germany, a country with comprehensive and elaborate medicinal rules for cannabis, is in a time of transition as a new government is set to begin to take over after 16 years of Angela Merkel.

Olaf Scholz, the proposed next chancellor of Germany, leads a three party coalition that will become the country's governing body. As part of its promises, talk of adult-use cannabis regulation has now gained even more momentum. A report from MJBizDaily quotes a German policy document that shows the coalition's stance:

"We are introducing the controlled distribution of cannabis to adults for consumption purposes in licensed shops. This controls the quality, prevents the transfer of contaminated substances and guarantees the protection of minors."

However, despite the promise and excitement, it remains to be seen how these ideas will be applied since no formal regulations have been drafted or approved yet.

Canadian cannabis retailer partners with popular delivery app

Tokyo Smoke, a cannabis retail operator in Canada owned by Canopy Growth (NASDAQ:CGC,TSX:WEED), announced a collaboration agreement with Uber Canada (NYSE:UBER) whereby cannabis consumers will be able to use the Uber Eats app to order products before they visit stores.

While the app won't let consumers get cannabis delivered to them, this new method opens the doors to more dynamic ways of buying cannabis.

"As a market leader in innovation and a platform used by so many Canadians, we believe this is the ideal next offering that can be done safely and conveniently on the Uber Eats app," Mark Hillard, vice president of operations with Tokyo Smoke, said in a press release.

A report from the Canadian Press indicates Ontario is considering allowing dispensaries to have delivery and pickup options made available to consumers permanently. The province allowed some of these purchasing options at the outset of the COVID-19 pandemic, but then removed them.

Lola Kassim, general manager of Uber Eats Canada, said this new end-to-end experience will provide consumers with responsible access to legal cannabis products.

Cannabis company news

  • Organigram Holdings (NASDAQ:OGI,TSX:OGI) issued financial results for its Q4 2021 period. In its report, the company notes a net loss of C$26 million despite a 22 percent uptick in net revenue to C$24.9 million. Beena Goldenberg, the newly appointed CEO of the firm, is encouraged by the market share position earned by the company, which said it became the fourth biggest producer in Canada during the reporting period.
  • Halo Collective (NEO:HALO,OTCQB:HCANF) confirmed the decision for Akanda, its spinoff company focused on international cannabis opportunities, to begin trading on a US exchange. "The number of shares to be offered and the price range for the proposed offering have not yet been determined," the company told investors in a press release.
  • High Tide (NASDAQ:HITI,TSXV:HITI) announced the acquisition of 80 percent of NuLeaf Naturals, a CBD product wellness developer, for an estimated US$31.24 million. The deal includes a three year option clause for High Tide to complete a total acquisition. "As international markets open up and as export regulations evolve, NuLeaf's cGMP-certified facility positions us to take advantage of the global CBD business opportunity," Raj Grover, president and CEO of High Tide, said.
  • Humble & Fume (CSE:HMBL,OTC Pink:HUMBF) released the financial report for its first 2022 fiscal quarter to shareholders and the market. "As the legal cannabis market in North America continues to mature, Humble remains agile and focused on providing a leading solution for brands to scale quickly and retailers to focus on their customers," Joel Toguri, CEO of Humble, said.

Don't forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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