Despite cobalt’s continued downward trend, with its being reduced in cathodes in energy storage, the general sentiment is that the demand for the commodity will exceed supply, says commodities expert Core Consultant MD Lara Smith.

“However, there is currently an oversupply in the hydroxide market, which leads to eroded premiums that the refiners of battery chemicals were once paying,” she tells Mining Weekly.

slower than expected ramp- up of electric vehicles (EVs) and increased availability of low-grade hydroxide concentrates from informal miners have also played a part in cobalt prices.

“For example, in December 2018, low concentrations of hydroxide was on 90% payables. By February this year, it declined to between 55% and 60% payables. Currently, prices are sitting at $25 000/t and at the end of April, the LME was quoting $34 250/t.”

The reduced cobalt prices have a notable impact on the African economy, as most of the world’s cobalt supplies come from the Democratic Republic of Congo (DRC). Therefore, if the commodity does not perform well, it, in turn, affects trade and the economy as a whole.

“The most significant regions in the world in terms of cobalt mining production for 2018 are the DRC, which produced 90 000 t/y, followed by Russia, which produced 6 000 t/y, and Cuba, which produced 4 800 t/y.”

Smith advises that the DRC has to reduce its dependence on the raw material as cobalt prices continue to plunge.

As the cobalt price increased in 2018, the DRC adjusted its mining code and royalties upwards. “Gross domestic product increased from 3.7% in 2017 to 5.8% in 2018, which was driven by higher cobalt prices.

“However, the projected growth for 2019 is 4.3%, which illustrates the sensitivity towards the cobalt market and price,” says Smith.

Challenges

She says the first challenge is that cobalt is a co-product and, in most instances, a by-product, which results in cobalt fortunes depending heavily on different metals with different fundamentals.

The second challenge is that cobalt is concentrated in the DRC and along the Copperbelt. The DRC and Zambia, which is where the Copperbelt is located, are countries with investor reputation risks.

“The fact that these deposits are in Africa, in a country with perceived poor governance, makes the deposits susceptible to artisanal and illegal mining, policy changes and difficulties in securing investors.”

Smith adds that there is also notable demand uncertainty because of the roll-out of EVs.

“It is not definite when EVs will happen, what the profile for EVs will look like and what the nature of the cathode will be, which, in turn, will influence how much cobalt is needed for the EV battery. There are too many unknowns.”

However, these challenges can be mitigated. Smith states that the recovery rates of the cobalt in the DRC can be improved.

“The recovery rates of the copper deposits in the DRC are well above 90% – in many cases 97% and higher – but mine owners can start to spend that additional dollar in processing costs to take recoveries of cobalt from 55% to 65% and towards 80%, bringing on more capacity that way.”

Meanwhile, there needs to be dialogue on artisanal mining to legalise some of the artisanal mining processes, says Smith, acknowledging that “artisanal mining is needed as a source of income”. She emphasises that initiatives to legalise and assist in mainstreaming the operations are imperative.

She points out that online physical commodity trading platform Continental Commodity Exchange, for example, allows for the onboarding of informal miners into organisations which aids in them becoming ‘know your customer’ compliant and, subsequently, to sell to the mainstream market.

“I believe we can better match the supply and demand fundamentals if the end-users, including cathode manufacturers and EV manufacturers, take a larger stake in these projects.”

More such initiatives may also lead to less price volatility, Smith concludes.