PRN: Cobalt: A Purple Patch for the Blue Metal

13/mar/2017 10:01:11 PR Newswire Turismo Contatta l'autore

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Cobalt: A Purple Patch for the Blue Metal

 
[13-March-2017]
 

LONDON, March 13, 2017 /PRNewswire/ --

Roskill will release its new cobalt market report with forecasts out to 2026 in April. It is essential reading for anyone needing a comprehensive overview of the cobalt market.

Cobalt is mostly mined as a by-product of nickel and copper and, as such, supply is dependent on demand for, and subsequent production of, these metals. There are some exceptions. Primary cobalt is produced by artisanal miners in the DRC. In Morocco, cobalt is mined as a primary metal. In China, some cobalt production is as a by-product of iron ore extraction. And in South Africa, cobalt is recovered as a by-product of PGM production.

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World mine production increased at a rate of 5.5% py over the 2009 to 2016 period. The DRC is by far the biggest mine producer of cobalt and accounted for two-thirds of world mine production in 2016. Almost all output was as a by-product of copper. DRC mine output increased at 7% py over the 2009 to 2016 period. Australia was the second-largest mine producer of cobalt in 2016, with all output as a by-product of nickel mining. Production in Australia has fluctuated over the past few years, but overall increased at 4% py over the 2009 to 2016 period. Roskill believes that the Philippines overtook Cuba to become the world's third-biggest mine producer in 2015. Mine production in the Philippines has increased at 15% py over the eight years to 2016, as two nickel operations have ramped-up.

Roskill's estimates suggest that, for the first time, the refined cobalt market exceeded 100kt in 2016. China was by far the biggest producer, accounting for more than half of global supply. Finland was the second-largest producer. Over the decade to 2016 the market has been characterised by a shift in production trends, with refined chemical production levels now exceeding refined metal production. This shift has been driven by demand from the batteries sector.

Rechargeable (secondary) batteries provide the largest, and the fastest growing, market for cobalt. The use of cobalt oxide, hydroxide, sulphate and powder, in rechargeable battery cathode (and anode) materials has been the main factor underpinning cobalt's strong demand growth. Nonetheless, other end-uses for cobalt are also demanding more and more material. Roskill estimates that cobalt consumption growth in high performance alloys grew at 5%py between 2009 and 2016, owing mainly to growth in consumption of superalloys in aerospace applications. Other key end uses such as tool materials, catalysts, pigments and magnets showed lower, albeit still stable, growth over this period.

Cobalt prices have a history of volatility and considerable swings have been seen since the turn of the century. In 2003 the price of high grade cobalt averaged just under US$11/lb but grew to reach over US$38/lb by 2008. At the peak in March 2008, high-grade cobalt metal was sold at over US$52/lb. Prices fell back dramatically between 2008 and 2009 as supply outstripped demand and the global economic crisis began to take hold. Following a slight recovery in 2010 prices began a gradual decline.

The period to 2016 was characterised by price stagnation. Monthly average high grade cobalt metal prices remained between US$10/lb and US$15/lb between 2012 and 2016. While demand has been strong, oversupply has been overhanging the market keeping prices in check. However, in the first quarter of 2017, there has been an uptick in the cobalt metal price. Prices stared the year at US$15/lb but reached US$17/lb at the start of February and rose to US$24/lb at the start of March. These increases are a result of strong demand, a tight metal market exacerbated by stockpiling, recent changes in the production landscape, and enduring concerns about the sustainability of the cobalt supply chain.

A number of temporary suspensions, most notably at Glencore's Katanga Mining in the DRC, have contributed to a tight metal market. This, coupled with strategic stockpiling, may be artificially inflating the cobalt price. As detailed in Roskill's upcoming Cobalt Report, there has already been material taken out of the market in recent years. The China State Reserve Bureau (SRB) has moved to purchase considerable quantities of cobalt since 2014. 

The past year has also seen a good deal of change to the corporate ownership of key cobalt-producing assets. Glencore recently acquired Fleurette Group's stake in Mutanda Mining, the world's biggest cobalt mine, bringing its share to 100%. The world's second-largest cobalt operation also changed hands. In November 2016, Freeport-McMoRan completed the indirect sale of its 70% interest in TF Holdings, owner of Tenke Fungurume Mining (TFM), to China Molybdenum (CMOC) for US$2.65Bn. The same week, Lundin Mining announced its intention to sell its share in TFM to Chinese private-equity firm BHR Partners for US$1.14Bn, with the deal due to be completed in H1 2017.

These changes to asset ownership reflect significant investment in the DRC from Glencore and increasing Chinese investment. However, many market participants still harbour concerns over the sustainability of DRC feedstock supply. An ageing energy and road network already puts huge pressure on extractive enterprises. Furthermore, the threat of resource nationalism remains a feature of the cobalt and copper sectors and new political tensions have the potential to destabilise the country further. In addition, the dark side of DRC cobalt supply has been brought to an international audience in recent months, prompting many consumers to revaluate their supply chains. In 2014, UNICEF reported that approximately 40,000 children worked in mines across southern DRC (mainly in what is now Haut-Katanga province), many of them mining cobalt in artisanal operations.

The outlook for cobalt demand is one of steady growth over the period to 2026, underpinned by demand for cobalt in batteries and other end use applications. After years of oversupply, and with the market now being broadly in balance, the question remains as to whether supply will be able to keep pace with demand. With concentrate supply increasing in the DRC, existing operations looking to maximise cobalt yields, some operations set to restart or ramp up further and several new projects in the pipeline, the long-term outlook for cobalt feedstock is positive. Further, with refined chemical capacity also set to expand over the coming years, the battery industry should be well supplied. Nonetheless, short term disruptions remain a possibility and supply bottlenecks may emerge for certain cobalt products in particular.

Cobalt: Global Industry Markets and Outlook to 2026, 13th Edition will be available to buy from Roskill Information Services Ltd, 54 Russell Road, London SW19 1QL UK soon. Click here to download the brochure.

Web: www.roskill.com

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