Cobalt’s near year-long price slide is finally coming to an end, but high inventories of the battery metal will stop prices quickly re-claiming 2018’s 10-year highs.
London Metal Exchange prices have crashed to two-year lows of $32,000 a tonne compared with levels near $100,000 in the first half of 2018.
The drop was sparked by rising supplies from the artisanal and industrial sectors in the Democratic Republic of Congo and a surplus of cobalt chemicals, used to make rechargeable batteries to power electric vehicles, in top consumer China.
Traders looking to buy cobalt to cover forward sales are expected to help a price recovery, but industry sources say it is likely to be muted as high stocks in Africa will provide a buffer against supply shocks.
The DRC accounts for most of the world’s cobalt supplies. It comes in the form of hydroxide which is converted into chemicals for the lithium-ion batteries also used in mobile devices.
“High cobalt prices encouraged new supplies last year. Artisanal mining supply has exhibited enormous growth in recent years to bridge the gap between supply and demand,” said CRU analyst George Heppel.
“However, artisanal mining supply has declined in the past six months due to lower payables and the falling cobalt price. Artisanal is the swing producer in the cobalt market.”
Cobalt hydroxide prices are typically a percentage of the metal price known as payables and hit levels above 90 percent last year. They have since slipped to around 65 percent.
CRU estimates supplies of cobalt from Congo’s artisanal sector jumped to 24,000 tonnes last year from 19,100 tonnes in 2017 and 10,500 tonnes in 2005, when prices hit 12-year lows below $10 a lb.