A record surge in supply of cobalt last year coincided with weaker demand in the second half, to leave the crucial battery metal in a massive surplus by the end of 2022, according to specialist trading house Darton Commodities.
(Bloomberg) — A record surge in supply of cobalt last year coincided with weaker demand in the second half, to leave the crucial battery metal in a massive surplus by the end of 2022, according to specialist trading house Darton Commodities.
Mined cobalt supply grew by 23%, helping to wipe out a big deficit from a year earlier, Darton said Monday in its annual cobalt report. At the same time, consumption was affected by a slowdown in demand from the electronics sector, which vies with the electric-vehicle industry as the biggest consumer of the battery metal.
The glut in cobalt stands in sharp contrast to ongoing supply concerns for another key battery metal — lithium. Rising EV sales helped fuel a sharp rally in prices for both metals early in 2022, but cobalt has since slumped more than 60% from a June peak, while lithium has fallen far less aggressively.
The surge in cobalt production was driven by increases in the Democratic Republic of Congo — which accounts for about 75% of global supply — as well as Indonesia, an emerging powerhouse in the small but rapidly growing market, Darton said.
Cobalt, a byproduct of copper and nickel mining, has caused frequent headaches for car-makers during prior bouts of under-supply, alongside persistent concerns about hazardous working conditions in Congo’s informal mining sector.
While large-scale industrial miners accounted for the bulk of last year’s increase in supply, output from so-called artisanal miners also rose sharply during the run-up in prices early on in the year, Darton said.
Global mine production grew 42% between 2020 and 2022 as Covid-19 related supply chain constraints eased, existing operations ramped up and several new mines were commissioned. Glencore Plc was by far the world’s largest cobalt miner last year, mainly from its two operations in Congo. Eurasian Resources Group and China’s CMOC Group Ltd., which also have large Congo operations, followed the Swiss company as the biggest producers.
In 2022, 44% of global mine supply was owned or controlled by companies from China, which also accounts for 78% of refined cobalt production, according to Darton estimates. Mine production is set to increase by about another third over the next two years, driven by further increases in Congo and Indonesia, the UK-based trading house said.
The cobalt market is currently bracing for another potential near-term supply shock, as CMOC works to resolve a dispute with its Congolese state-owned partner, which would allow it to export a huge stockpile of semi-refined cobalt hydroxide from its Tenke Fungurume mine. While its exports were blocked in mid-July, CMOC has kept the mine running at close to full capacity, simply stockpiling the extra metal until it can resume shipments, Bloomberg reported last month.
“While the broader cobalt complex endured a massive correction during 2022 against a backdrop of sharp supply increases and numerous demand setbacks, green shoots are starting to show,” Darton Commodities said. “However, the standoff between CMOC and Gecamines in the dispute over royalty payments remains a wild-card, and has the potential to drastically shift the cobalt hydroxide market in one direction or the other.”
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