Market bearish as Indonesian cobalt metal to further oversupply Europe
In this article for the Crucible, Nathan Day build on S & P Commodity Insights Critical Minerals Briefing published in September 2024 to examine the trends and forecasts for cobalt as the market heads into 2025. Key highlights:
- Indonesian metal to add to cobalt supply glut
- European cobalt metal prices remain at multiyear lows
- Alloy grade metal supply tightness expected in 2025
Oversupply remains a key driver of price in the European cobalt metal market, with a continued depressed outlook for the product amid Chinese overproduction.
With more Chinese metal producers increasing production capacity and other origins like Indonesia becoming more prevalent, the oversupply picture has become the norm in the European market.
Same old (supply) story
In China, numerous cobalt sulfate refiners are transitioning from producing salts to metal, driven by the higher profit margins associated with metal. Additionally, cobalt sulfate has a shelf life of about three months, making it susceptible to both product deterioration and price fluctuations, whereas cobalt metal has a significantly longer shelf life.
Given the already historically low spot price levels for cobalt metal, market participants have suggested that there should be limited downside potential in the near-term.
Platts assessed cobalt metal mixed-use basket A at $10/lb IW Rotterdam Sept. 30, down from $10.40/lb when the new assessment was launched on 2 September 2024. Comparatively, this has come down from $12.75/lb IW Rotterdam, the low end of Platts’ previous cobalt metal assessment, at the start of 2024.
According to one market analyst, the theoretical price floor for cobalt hydroxide is about $3.50/lb, which considers logistics, warehousing and financing. This is because cobalt is mined as a byproduct and is supported by relatively strong copper prices. Cobalt hydroxide is consumed by producers of both cobalt metal and cobalt sulfate. The conversion cost from cobalt hydroxide into metal is estimated to be from $3-$4/lb, including profit margin, according to market sources. Platts assessed Cobalt Hydroxide at $6/lb CIF China on 30 September, down from $6.60/lb on 1 July 2024.
The continued overproduction of cobalt metal has been a particular issue for those brands that can be accepted by most of the European end-user market, especially for those which have a higher cost of production.
The market entered Q4 2024 in oversupply as the nickel-cobalt producer Ambatovy Minerals in Madagascar shut down a slurry pipeline used to transport hydrate nickel ore to its refinery, following an incident involving the discharge of ore on 25 September. It was more than a month later than it began a gradual and slow restart. Several cobalt market participants told S&P Global Commodity Insights that the shutdown has had no impact on spot prices, amid the wider supply glut.
Ambatovy generally produces around 3,100-4,000 mt/year of cobalt metal briquettes, according to market participants.
Production increases led by CMOC Group, now the largest individual producer of refined cobalt, have surpassed guidance. The company achieved 83% of its annual production target for cobalt in the first half of 2024 alone, producing 54,024 metric tons of refined cobalt, representing a 178% year-over-year increase, according to their 2024 interim results released on 23 August. This increase came as Glencore, another major refined cobalt producer, saw its production fall 27% to 15,900 mt in the same period.
More Indonesian production comes online
In 2023, Indonesian mined production accounted for 8% of global supply, or 18,200 mt, according to an industry source — a 135% increase year on year. In 2024, mined supply of cobalt from Indonesia is expected to reach 30,300 mt, equivalent to 13% of global supply.
The PT Halmahera Persada project, a joint venture between Chinese metal service provider Lygend Resources and Indonesian mining company Harita Nickel, is one of the more recent additions to the cobalt metal market and reached its annual design capacity of 4,000 mt of refined cobalt per year as at 2 September, with the completion of its third high pressure acid leach, or HPAL, project on Obi Island, Indonesia.
Multiple traders in the European market told Commodity Insights that they have purchased samples of Lygend’s cut cathodes, but as a new entrant, acceptance from consumers was heard to be mixed.
“A persistent oversupply of cobalt is raising concerns about the short-term market outlook,” a Europe-based trader said. “Chinese and Indonesian cobalt refiners are continuing to ramp up production, but downstream demand remains insufficient to absorb the additional volumes, resulting in further stock accumulation.”
“This accumulation could accelerate once Chinese refiners fulfil their delivery commitments to the SRB [China’s National Food and Strategic Reserves Administration] by late this year or early next.”
Commodity Insights anticipates the refined cobalt market to remain in a technical surplus through to 2028. This surplus is expected to peak in 2024 before narrowing over the
subsequent years.
Forecasts show that the refined cobalt market is expected to remain in a 27,000 mt surplus heading into 2025, according to the Commodity Insights Critical Minerals Briefing from September 2024.
By Nathan Day
S&P Global Commodity Insights www.spglobal.com
