Oversupply, low prices for cobalt to persist in 2024 as demand slips

A cobalt surplus, along with flagging demand, will keep prices down in 2024 as production continues to increase and battery producers turn to more affordable options.

There was a cobalt deficit of 8,000 mt in 2021, according to S&P Global Commodity Insights research. Mining companies started ramping up production to meet demand from the electric vehicle sector, and the cobalt market recorded a surplus of 3,000 mt in 2022.

But the production increase came alongside a shift by some automakers toward replacing cobalt in their batteries, turning to cheaper alternatives. Battery producers have also started moving away from the metal to avoid human rights issues and environmental problems linked to cobalt mining in the Democratic Republic of Congo, where safe practices have been a challenge.

The three-month London Metal Exchange price for cobalt dropped 35.7% year on year to $33,420/mt as of Dec. 1, according to S&P Global Market Intelligence data. As of Dec. 22, the three-month price has plunged further to $29,135/mt.

“We expect 2024 to continue with relatively low market prices. If and when EV demand picks up pace, we believe that prices will once again decrease but most likely not reach historic highs,” David Sturmes, head of corporate engagement and partnerships at the Fair Cobalt Alliance, a cobalt supply chain trade group, told S&P Global Commodity Insights in an email.

Cobalt in abundance

Refined cobalt supply is expected to grow 15.8% year on year to 257,000 mt in 2024 from an estimated 222,000 mt in 2023, according to a Nov. 27 report by S&P Global Commodity Insights’ Metals and Mining Research team.

Several companies have announced plans to process the metal. Eramet plans to build a downstream hydrometallurgy plant with SUEZ Groupe in France, aiming to process the black mass from end-of-life batteries and scrap to produce 1,000 mt/year of cobalt in the form of battery-grade metal salts.

Exploration budgets have also expanded, with cobalt recording a third year of marginal increases totaling $74 million, according to a Nov. 29 S&P Global Commodity Insights research report. Cobalt exploration budget allocations to Australia rose by $13 million, or 78%, to $30 million for 2023.

“There is an increase in cobalt capital allocation across both our monthly financing data (cobalt financing up 153% [year on year] in the first 10 [months]) and the annual corporate exploration budgets (cobalt budgets up 4% in 2023),” Alice Yu, an S&P Global Commodity Insights senior analyst, said in an email.

Mineral Resources recently agreed to buy Pantoro’s lithium, nickel, copper and cobalt rights on the Norseman gold project in Western Australia for up to $38.5 million, and Hancock Prospecting has touted its capacity to develop the Andover lithium-nickel-copper-cobalt project, also in Western Australia, after acquiring an 18.9% interest in Azure Minerals.

As for countries seeking cobalt, the Geological Institute of Angola and the US Geological Survey recently entered an agreement to collaborate on mapping Angola’s critical minerals. The country also has copper, lithium, and manganese and has been working to diversify exports dominated by oil and diamonds.

Slipping demand

Cobalt consumption has been declining in 2023, and analysts expect that to continue. Cobalt trading was sluggish in November from weak battery demand across plug-in electric vehicles and electronics, according to the Nov. 27 S&P Global Commodity Insights research report.

Challenges faced by cobalt producers have been compounded by the rise of low-cobalt batteries as battery makers develop new chemistries that use less of the metal than ever before. US and European carmakers have been working to avoid cobalt from the DRC because of allegations of labor and environmental abuses. DRC produced 73.3% of the world’s cobalt in 2022, according to S&P Global Market Intelligence data.

In particular, lithium-iron-phosphate batteries, which use no cobalt, have become popular in China, and US carmakers are beginning to adopt them as well. Tesla outlined plans in 2021 to shift its standard-range EVs to a battery using an LFP cathode, and Ford is building a $3.5 billion LFP factory in Michigan.

“Cobalt intensity in batteries is on a trend decline,” Yu said. “Improvement in the energy density of LFP batteries is squeezing the share of mid-nickel chemistries that use the most cobalt.”

LFP battery production in China rose 50.3% year on year in the first seven months of 2023, S&P Global Commodity Insights said in an August research report. LFP technology patents outside the country have expired, negating the patent fee and pushing down the cost of production.

Cobalt’s hope

The FCA expects cobalt-based battery chemistries to remain the most advanced technology, especially for EV purposes, Sturmes said.

“As cobalt prices stabilize around increased production volumes, so should the economic viability of continuing to use cobalt,” Sturmes said. “The consumer preference, driven by range anxiety, usually lies with longer range batteries, which traditionally contain cobalt.”

The possibility of sectors other than EVs using cobalt is on the rise, making investments feasible in the long run, Sturmes added.

“In light of cobalt being perceived as [a critical mineral] to both the EU and the US, we anticipate continued and even increased investment into the non-Chinese cobalt supply chains, ranging from investment in exploration, to mining, to processing and recycling,” Sturmes said.

“In many conversations, especially in the US, the importance of cobalt for national defense purposes is gaining traction,” Sturmes added. “Investment in mining is usually cyclical. In this instance, I believe that, due to considerations beyond profitability, investment will increase despite the currently weak price.”

S&P Global Commodity Insights reporter Franchesca Viernes produces content for distribution on S&P Capital IQ Pro. S&P Global Commodity Insights is a division of S&P Global Inc.