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The Investing News Network (INN) spoke with analysts, market watchers and insiders about which trends could impact the cobalt sector.
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A Sneak Peek At What The Insiders Are Saying
“Batteries are becoming better, cheaper and more abundant — these are the three things that are driving forward what I think is the mega trend of our times."
— Simon Moores, Benchmark Mineral Intelligence
"The current EV penetration rate means demand for cobalt will continue to grow, with nickel-cobalt-manganese technologies remaining the dominant cathode type."
— Cameron Hughes, Benchmark Mineral Intelligence
"The sheer absolute growth in EV sales will mean that EV-related cobalt demand will continue to accelerate in the years to come."
— Andries Gerbens, Darton Commodities
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2024 Cobalt Outlook: Australia Edition
Table of Contents
Cobalt Market Update: Q1 2024 in Review
ASX Cobalt Companies: 4 Biggest Companies
Cobalt Market Update: Q1 2024 in Review
The cobalt market put on a mixed performance in the first quarter of 2024 as metal prices stalled and contracted, while sulfate and hydroxide values increased.
The sector is divided into three segments. Cobalt metal is used as an alloy to strengthen and harden, while cobalt hydroxide is used in lithium-ion batteries, electronics and paint pigments.
Lastly, cobalt sulfate is used to make storage batteries, electroplating baths and some animal feed.
After reaching a second all-time price high in 2022 — US$82,200 per metric ton (MT) — cobalt metal prices have been retracting. They spent the first month of the year locked at the US$29,134.30 level, but sank to a three year low of US$27,215 on April 15. By the end of the quarter, cobalt metal had seen a 2.01 percent erosion in value.
Although cobalt metal prices declined during Q1, Benchmark Mineral Intelligence Pricing Analyst Roman Aubry noted that the rest of the market exhibited strength during the first 90 days of 2024.
“Benchmark has only seen a price decline for cobalt metal in Q1 of 2024; most of our cobalt grades have seen a slight positive trend on the back of rising cobalt hydroxide prices,” he told the Investing News Network (INN) via email.
What factors impacted cobalt supply and demand in Q1?
According to the US Geological Survey's latest report on cobalt, mine supply of the battery metal ballooned in 2023, growing 16.75 percent year-over-year, from 197,000 MT in 2022 to 230,000 MT in 2023.
The vast majority (170,000 MT) was mined in the Democratic Republic of Congo (DRC). In fact, the five largest cobalt mines in the world are located in the African nation.
As Adam Webb, product director at Benchmark Mineral Intelligence, explained during a late March webinar, the cobalt deposits in the DRC are much richer compared to anywhere else globally.
These high-grade areas have attracted the attention of Chinese mining companies, particularly China Molybdenum (SHA:603993,OTC Pink:CMCLF), which is now the largest cobalt producer in the DRC and the world.
With cobalt demand projected to increase by 60 to 70 percent by 2040, the DRC is projected to play a vital role in the energy transition. The country will be responsible for filling most of the additional 214,000 MT of cobalt demand expected by 2030, as it is the only country that can deliver this level of cobalt supply growth, explained Webb.
As Aubry, a colleague of Webb, noted in an email to INN, most of this increased cobalt supply originating in the DRC will end up in electric vehicles (EVs), which is a positive trend for the market.
“It’s hard to understate just how much demand will be added to the cobalt market by the EV industry,” he said. “Already it has become the largest demand sector, and its dominance is only set to grow.”
This sentiment was reiterated in the latest edition of the International Energy Agency's (IEA) Global EV Outlook, which forecasts a significant surge in EV sales, with one in five cars sold worldwide expected to be electric this year.
The report notes that global EV sales are projected to top 17 million by the end of 2024, with China leading the charge with roughly 10 million units. Europe and the US are also seeing increased growth in EV adoption, despite a generally weak outlook for passenger car sales. The report attributes this growth to substantial investment in the EV supply chain, ongoing policy support and declines in prices for EVs and batteries. Under current policies, nearly one in three cars in China and one in five in the US and EU are expected to be electric by 2030.
“The continued momentum behind electric cars is clear in our data, although it is stronger in some markets than others,” wrote IEA Executive Director Fatih Birol. “Rather than tapering off, the global EV revolution appears to be gearing up for a new phase of growth. The wave of investment in battery manufacturing suggests the EV supply chain is advancing to meet automakers’ ambitious plans for expansion.”
Sustained growth in the EV space helped to catalyze cobalt chemical prices during the second month of the year.
“From mid-February onwards, we saw an uptick in demand for cobalt chemicals, particularly from cobalt sulphate, as nickel-cobalt-manganese (NCM) battery cathode manufacturers began to restock their cobalt chemical reserves, in anticipation for increased demand from Tier 1 cell suppliers for high-end EV models,” said Aubry.
Cobalt surplus seen lasting into 2025
Although the long-term outlook for cobalt remains positive, Aubry pointed to various near-term challenges.
“The cobalt market is presently very bearish; the source of this is a significant oversupply of cobalt hydroxide,” he said. “Our forecasting team estimates the cobalt oversupply to be around 12,400 tonnes in 2024.”
The Benchmark team expects this surplus position to last into 2025.
Another factor that could weigh on the cobalt market and prices is battery chemistry, according to Aubry.
“Currently the biggest threat to cobalt is the adoption of lithium-iron-phosphate (LFP) chemistries for EVs; China in particular has been rapidly increasing LFP production,” he explained. “Despite this, cobalt demand overall is expected to go up considerably even if LFP displaces NCM chemistries significantly due to the sheer potential of EV growth.”
Benchmark projects that NCM batteries will “maintain over 40 percent market share, particularly in the west where consumers value distance covered in a single charge.”
“The EV market is set to take off further in the coming years, and critical components, like cobalt, will quickly see their demand rise much faster than the supply can match,” said Aubry. “By 2030, a significant supply gap will form, and if the market does not sufficiently adapt, we may see cobalt prices exceed the heights of 2022.”
While cobalt-containing batteries are likely to retain a broad chunk of the market despite LFP growth, one headwind that has the potential to disrupt output is mined supply. “The biggest pain point in cobalt is in mining capacity more than refining. In that aspect, additional refining capacity will certainly help alleviate some of this pressure; however, there is still a fundamental difference in what the demand is for the market compared to what is supplied. While refining capacity may increase prices for some cobalt grades, it may in turn hurt others,” noted Aubry.
Don’t forget to follow us @INN_Resource for real-time news updates.
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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How to Invest in Cobalt
Cobalt has been used as a blue coloring agent in pottery, glass and ceramics for thousands of years.
However, more recently, demand from high-tech sectors has overshadowed traditional cobalt uses. Today, this critical metal is an essential ingredient in electric vehicle (EV) batteries, energy storage systems, metal alloys and more.
The lithium-ion battery sector in particular has become a major source of cobalt demand, and analysts expect that this sector will drive the cobalt market going forward. At the same time, cobalt supply could tighten substantially due to human rights abuses in the Democratic Republic of Congo (DRC), where most cobalt is produced.
Given those factors, many investors are now wondering how to invest in cobalt. To help those interested in the sector, we’ve put together a brief guide on cobalt supply and demand and different investing options.
What factors impact cobalt supply and demand?
Cobalt is mainly produced as a by-product of copper and nickel, with the DRC supplying the bulk of the world’s cobalt. Most DRC cobalt comes from an area known as the Central African Copper Belt, which hosts most of the country's cobalt-hosting deposits. The country also holds nearly half of global cobalt reserves, cementing its dominance.
Cobalt is produced in about a dozen countries. The DRC put out 170,000 metric tons (MT) in 2023, far ahead of runner-up Indonesia’s 17,000 MT. Russia (8,800 MT) and Australia (4,600 MT) were the third and fourth largest, respectively.
As noted, DRC cobalt is facing increasing scrutiny. While cobalt is not a conflict mineral, some human rights groups are pushing for it to receive that designation. Many DRC cobalt operations are dangerous, poorly managed and involve child labor, and these human rights groups believe end users should be sourcing the metal elsewhere.
As of early 2024, cobalt was in a supply overhang as increased production out of the DRC and Indonesia has not been taken up by demand, which took a hit in 2023 on the back of sliding sales for EVs. Fastmarkets analysts are "forecasting an ongoing and widening surplus in the global cobalt market in 2024".
It’s tough to say exactly when and by how much cobalt demand will rebound in the coming years, but as noted, the lithium-ion battery market will be a huge driver of that demand.
"Falling cobalt prices may lead OEMs in certain markets to reconsider lower nickel NCM batteries, with higher cobalt content, due to the potential cost savings," notes Fastmarkets in its report.
What are the main ways to invest in cobalt?
For investors interested in cobalt, and there are two main ways to gain exposure.
The first option is cobalt futures which can found on the London Metal Exchange. These futures are quoted in US dollars per MT. Contracts range over a span of 15 months, allowing investors to make bets on the metal over varying time periods. Typically futures trading is done by more sophisticated investors.
The second option is to invest in cobalt-focused companies. Benchmark Mineral Intelligence Chief Data Officer Caspar Rawles has recommended that any investor interested in investing in cobalt look at copper and nickel companies that are mining or exploring for cobalt, “unless (they) are lucky enough to find a (junior with a) deposit that is primarily cobalt.”
He added, “I think the key for smaller companies is to be targeting value-added products further downstream than simply a concentrate, such as cobalt sulfate, targeting the battery supply chain.”
For ideas on cobalt stocks to invest in, check out our list of the biggest producers of the metal — these are some of the largest names in the sector. You can also read our overview of Canadian cobalt companies that have seen year-to-date gains, and our list of the biggest cobalt stocks on the ASX by market cap.
This is an updated version of an article originally published by the Investing News Network in 2010.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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ASX Cobalt Stocks: 4 Biggest Companies in 2024
Strong electric vehicle (EV) sales have been driving up demand for key battery raw materials in recent years. EVs require lithium-ion batteries to run, and each battery could contain up to 15 kilograms of cobalt.
This means that as demand for EVs increases, so too will demand for cobalt — and, as one of the top four cobalt-producing countries in the world, Australia finds itself in a position to capitalise on this demand.
About 74 percent of global cobalt output comes from the Democratic Republic of Congo (DRC). However, Australia is proving to be a solid contender; though it is only responsible for 2 percent of the world’s cobalt production, it holds about 15.5 percent of global reserves. Moreover, while the DRC’s labour and mining practices have often been labeled unethical and unsustainable, Australian miners are focused on safer, more environmentally friendly practices.
While cobalt prices haven't recovered from their fall in early 2023, EV demand is expected to be strong in the long term.
When it comes to getting exposure to the Australian market, large players may be a good place to start. Read on for a look at the biggest cobalt stocks on the ASX sorted by market cap. All market cap and share price data was obtained on April 15, 2024, using TradingView's stock screener.
1. Ardea Resources (ASX:ARL)
Market cap: AU$144.81 million; current share price: AU$0.73
Ardea Resources' primary focus is developing its wholly owned Kalgoorlie nickel project, which the company says “hosts the largest nickel-cobalt resource in the developed world.” The project includes the Goongarrie Hub deposit.
A 2023 prefeasibility study shows that Goongarrie Hub has an ore reserve of 194.1 million tonnes at 0.05 percent cobalt and 0.7 percent nickel, resulting in 99,000 tonnes of contained cobalt and 1.36 million tonnes of contained nickel. The study indicates that this resource would support an open-pit mining operation with a 40 year mine life and annual output of 2,000 tonnes of cobalt and 30,000 tonnes of nickel. Ardea is now working towards a definitive feasibility study.
In its September 2023 quarterly report, Ardea provided an update on its plans. It also confirmed an increase in throughput over the prefeasibility study's 3.5 million tonnes per year due to a reduction in autoclave residence time. In late March, the company shared that a detailed hydrogeology drilling program had commenced to quantify long-term water supply.
2. Jervois Global (ASX:JRV)
Market cap: AU$64.86 million; current share price: AU$0.24
Jervois Global is focused on producing battery minerals, with a specific emphasis on cobalt. Jervois boasts operations worldwide and hopes to become the only cobalt miner in the US at its Idaho Cobalt Operation (ICO).
In mid-2023, the company won US$15 million from the US Department of Defense (DoD) to fund drilling at ICO as well as a bankable feasibility study for construction of a US cobalt refinery. Resource drilling began at the Sunshine deposit at the ICO project shortly after, while work on a bankable feasibility study for the cobalt refinery was launched in October. DoD-funded resource-extension drilling at the RAM deposit kicked off in March of this year.
Most recently, Jervois completed its maiden JORC-compliant resource estimate for the Sunshine deposit as part of its deliverables under the DoD funding agreement. The deposit hosts inferred resources of 0.52 million tonnes at 0.5 percent cobalt, 0.68 percent copper and 0.49 grams per tonne gold at a cut-off-grade of 0.25 percent cobalt.
3. Cobalt Blue Holdings (ASX:COB)
Market cap: AU$56.74 million; current share price: AU$0.14
Cobalt Blue Holdings focuses solely on cobalt and is enthusiastic about the metal’s ethical and environmental potential within the renewable energy market. The company owns the New South Wales-based Broken Hill project, a cobalt asset that it says adheres to Australian labour and sustainability standards, and is planning the Kwinana cobalt-nickel refinery.
In November 2023, Cobalt Blue released the results of its cobalt-nickel refinery study. During Stage 1, the proposed refinery would process third-party feedstock and have a capacity of 3,000 tonnes of cobalt sulphate per year, along with 1,000 tonnes of nickel sulphate annually. Stage 2 would have the option to include potential feedstock from Broken Hill. The study projects stable margins throughout potential cobalt price fluctuations.
A few days later, the company announced that its potential partner for the refinery is Iwatani (TSE:8088), a battery minerals trader. According to Cobalt Blue, if everything goes through as planned, the refinery will be constructed on Iwatani's property in Western Australia's Kwinana industrial area. Cobalt Blue provided another update on the refinery in April, reporting that construction is expected to begin before 2024 is over.
4. Kuniko (ASX:KNI)
Market cap: AU$22.96 million; current share price: AU$0.26
Norway-focused Kuniko is targeting three metals key for the EV industry: cobalt, nickel and copper. The majority of its assets are in Norway, including its Skuterud cobalt project, Undal-Nyberget copper project and Ringerike battery metals project. Ringerike hosts the past-producing Ertelien nickel-copper-cobalt target.
In its quarterly report for September 2023, Kuniko highlighted significant developments, including an investment of AU$7.8 million by Stellantis (NYSE:STLA), which acquired a 19.99 percent interest in Kuniko and secured a 35 percent offtake for future production of nickel and cobalt sulphate from Kuniko's Norwegian projects for nine years.
In April, the company released a maiden resource estimate for Ertelien showing 23.3 million tonnes of inferred resources containing 49,700 tonnes of nickel, 37,300 tonnes of copper and 3,300 tonnes of cobalt, including high-grade sulphide resources of 4.59 million tonnes at 0.64 percent nickel equivalent and disseminated sulphide resources of 18.68 million tonnes of 0.22 percent nickel equivalent.
A second phase expansion drill program is now underway at Ertelien with an updated resource estimate to be published later in 2024. “Our aim is to demonstrate progress towards developing a Voisey Bay style resource as a potential new source of critical battery metals for European industries,” Kuniko CEO Antony Beckmand stated.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Melissa Pistilli, currently hold no direct investment interest in any company mentioned in this article.
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