Glencore reports on Cobalt industry

2021 started strongly from a demand and pricing perspective, with positive momentum in Chinese and European EV demand and a level of stockpiling key strategic materials, particularly in China. Commencing 2021 at $15.30/lb, prices rallied 65% through Q1 to reach a H1 high of $25.30/lb. Prices then cooled off somewhat before a strong recovery in H2 saw the year-end price at $33.50/lb.

While the EV sector has been the main demand catalyst for cobalt, a number of metal demand segments exhibited post-Covid recovery.

The cobalt hydroxide supply bottlenecks witnessed during H2 2020 eased in early 2021, but stronger lithium-ion battery demand from both EV and non-EV applications (e.g. phones) resulted in hydroxide payables marking a high of 94% early in the year, with major producers having limited spot availability. Payables averaged 90% during H1 and remained within a stable band of c.88-90% for H2.

There is mounting EV investment and adoption. The Chinese and European EV sales markets have developed strongly, while the North American market is emerging as a major EV growth region with key manufacturers deploying tens of billions of dollars in investment. The diminishing cobalt per kWh requirement through R&D gains is being outstripped by the rate of EV sales growth, underpinning strong cobalt demand.

Various cobalt supply projects are due to commission over the coming years, however elevated execution risk is likely to temper the rate at which new cobalt units are available, while incumbent production may also be impacted by continued logistical challenges. As a result, the cobalt market fundamental outlook remains robust.

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