Cobalt became a >100ktpy market in 2015. Over the past few years, the cobalt sector has worked through a period of oversupply and has since remained broadly in balance. Nonetheless, despite strong demand growth, especially from the batteries sector, excess capacity and production weighed on prices. The result was a period of price stagnation. In Q1 2017, there was an enormous uptick in the cobalt price. Q1 prices averaged US$21/lb and strengthened further in Q2. By Q3, prices were above US$30/lb.
The price rises seen in 2017 have been driven by several factors. On the demand side, the market’s reaction to the anticipated demand for cobalt in lithium-ion batteries is the principal reason. Consumption in cobalt in batteries increased at 16%py over the 2009 to 2016 period, as demand for portable consumer electronics (and the cobalt-containing lithium-ion batteries within) continued unabated. While growth in demand for portable consumer electronics is now expected to slow, demand from the automotive sector is set to increase. Roskill’s baseline forecast suggests that demand from the battery sector will increase at a rate of more than 15%py to 2026. Elsewhere on the demand side, the outlook is also positive. All major end-uses for cobalt are expected to see steady growth over the medium term, even though some represent relatively mature markets.
With cobalt demand expected to surge, concerns have arisen as to whether there will be enough cobalt to meet demand. Refined capacity expansions, mostly in China, will help supply meet demand to 2021, but thereafter further expansions will be required. Moreover, the feedstock for this additional capacity will also need to be found, and while most will come from increases from existing producers, the rest will need to be supplied by new projects, artisanal mines, tailings reprocessing or new or restarted nickel mines. As many existing and potential producers are in the DRC, continued political instability and concerns about energy and infrastructure in the country remain a core driver of market sentiment.