Roskill in a keynote speech at the 2021 Cobalt Conference provided a comprehensive market summary for cobalt, reviewing market dynamics during 2020, as well as discussed key market drivers for 2021 and beyond.
Cobalt has a history of volatility, and the market has become more volatile since 1970s when a free market started to develop. This is largely underpinned by some of the unique characteristics of the cobalt market, including its by-production nature, high concentration of production, and a relatively small market size. But surprisingly, 2020 was a stable year, with the cobalt price only dipping by 7% Y-o-Y, in comparison with a slump seen in 2019 and a surge over the 2017-2018 period.
Roskill believes that there are two main reasons explaining this. One is that after a period of oversupply, market fundamentals have improved over the course of 2020, largely as a result of the suspension at the Mutanda operation. Another factor is the cobalt market overall has been resilient to the Covid-19 pandemic, which has limited downward pressure on prices.
In 2020, the main change in supply was a drop in the production level for both mined and refined cobalt, marking the first decline since 2016. Mutanda’s absence, coupled with logistic disruptions in Africa caused by the pandemic, resulted in tight hydroxide feedstock supply. This, in turn, led to the increased utilisation of alternative feeds, such as cobalt briquette and scrap materials over the course of 2020.
The biggest demand-side change over 2020 is the divergent trend between cobalt metal and chemical markets, with chemical demand surging and metal demand falling. This is largely as a result of more robust battery demand compared to other cobalt applications which rely heavily on metal feeds such as alloys and tool materials.
This part of the analysis is based on the ‘State of the Cobalt Market’ Report, which was prepared by Roskill for the Cobalt Institute in December 2020. This report was published by the Cobalt Institute on Tuesday, 18 May, and is available on the Cobalt Institute’s website.
Roskill forecasts cobalt demand to grow at a CAGR of 7% in the period to 2030. Such steady demand growth will largely be underpinned by the uptake of EVs globally and healthy medium-term demand from portable electronics amid the roll-out of 5G technology. Although within the EV battery sector the trend towards reduced cobalt use per kWh is set to continue, cobalt demand will still be boosted by the growing market size.
To keep the market in balance, Roskill believes new supply equivalent to four ‘Mutandas’ will be required over the period to 2030. While in the short to medium term, the timing of Mutanda’s restart would be a determining factor for market balances, longer term, cobalt price needs to stay at a reasonable level to incentivise new investment.
Roskill believes that the cobalt market will, as always, see volatility over the years ahead, however, price movements may become less steep and more sustained in the next cycle as the market shows signs of maturing.