Wondering how to invest in cobalt? Our brief guide covers supply, demand and different investing options for this critical metal.
Cobalt has been used for thousands of years as a blue coloring agent in pottery, glass and ceramics. However, in recent years demand from more high-tech sectors has emerged. Today, cobalt is used in batteries for electric cars and in energy storage, alloys and more.
The battery sector in particular has become an important source of cobalt demand. Demand for lithium-ion batteries, which require cobalt, is surging, and analysts expect that this demand will drive the cobalt market in the coming years. At the same time, cobalt supply could tighten substantially due to human rights abuses in the Democratic Republic of Congo (DRC), where most cobalt is produced.
Given those factors, many investors are now wondering how to invest in cobalt. To help those interested in the sector, we’ve put together a brief guide on cobalt supply and demand and different investing options. Read on to learn more about this exciting critical metal.
How to invest in cobalt: Supply and demand
Cobalt is mainly produced as a by-product of copper and nickel, and as mentioned the DRC supplies the bulk of the world’s cobalt. Most cobalt in the DRC comes from an area known as the Copperbelt. It holds one-third of global cobalt reserves and accounts for 40 to 50 percent of cobalt output in the DRC.
The DRC produced 90,000 metric tons of cobalt in 2018, far ahead of Russia’s 5,900 metric tons. The Eastern European nation was the world’s second-largest cobalt producer that year, while Australia and the Philippines were the third and fourth largest, respectively. Cobalt is currently produced in about a dozen countries worldwide.
As noted above, cobalt from the DRC is facing increasing scrutiny. While cobalt is not officially a conflict mineral, some human rights groups are pushing for it to receive that designation. Many DRC cobalt operations are dangerous and poorly managed, and these groups believe that cobalt end users should be sourcing the metal elsewhere.
Cobalt demand is also important to look at. It’s tough to say exactly how much demand for the metal will increase in the coming years, but many experts agree that growth will be substantial. As noted, the lithium-ion battery market will be a huge driver of that demand. Lithium-ion batteries are used in electric vehicles, as well as other electronics.
The consensus seems to be that those supply and demand dynamics will push the cobalt market into deficit in the coming years. Benchmark Mineral Intelligence expects cobalt demand to increase four-fold, rising to 219,679 tonnes by 2023 and 276,401 tonnes by 2028, if full battery capacity is achieved.
How to invest in cobalt: Futures and stocks
Those circumstances have left many investors interested in cobalt investing. As CommodityHQ notes, there are two main ways to invest in cobalt: futures and stocks.
Cobalt futures can be found on the London Metal Exchange under the ticker CO. These futures began trading in early 2010 and are quoted in US dollars per tonne. Contracts range over a span of 15 months, allowing investors to make bets on the metal over varying time periods.
Another option to get exposure to the critical metal is to invest in cobalt-mining companies. Benchmark Mineral Intelligence Senior Analyst Caspar Rawles has recommended that investors interested in investing in cobalt look at copper and nickel companies that are mining or exploring for cobalt, “unless (they) are lucky enough to find a (junior with a) deposit that is primarily cobalt.”
He added, “I think the key for smaller companies is to be targeting value-added products further downstream than simply a concentrate, such as cobalt sulfate, targeting the battery supply chain.”
Our overview of TSXV-listed cobalt companies that have seen year-to-date gains includes a number of larger companies with exposure to cobalt, as well as some smaller companies looking to break into the space. It is a good place to start for those who are new to the industry.
Investors may also want to read our list of the largest cobalt mining companies.
This is an updated version of an article originally published by the Investing News Network in 2010.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.