China mining giant China Molybdenum (CMOC) announced an optimistic cobalt production guidance for 2023 while Glencore, the other leading cobalt miner, lowered its cobalt output guidance this year.
The two cobalt giants are taking different approaches at a time when cobalt prices keep falling, nearing the historical lows witnessed in 2019, and the cobalt market is estimated to be bogged down by surplus.
The cobalt market is estimated to trend from a balanced dynamic in 2022 to a surplus in 2023 with anticipated supply increase outpacing the demand increase, especially when lithium cobalt oxide (LCO) battery demand from consumer electronics is not expected to recover notably from last year.
Despite EV battery demand taking off, consumer electronics remain a crucial end-user for cobalt and a key wind indicator for market sentiment.
We estimate cobalt demand from consumer electronics batteries dropped at least 10% in 2022 on annual basis, and such demand growth in 2023 is likely to remain largely flat.
In addition to the new and ramp-up cobalt mine output in the DRC, cobalt supply from Indonesia is also estimated to play a larger role in the supply chain in the future.
It is estimated that cobalt supply from mixed hydroxide precipitate projects in Indonesia will hit 18,000 tonnes in 2023, from barely anything in 2021.
The price of cobalt hydroxide, the main feedstock of cobalt processing, is trending below $10 per lb, which is already below the breakeven point for some marginal miners.
It is estimated the cobalt feedstock price will continue to be bogged down around $10 per lb in the following few months.
The price of cobalt hydroxide hit its historical low at about $7.4 per lb in mid-2019 when Glencore announced it would shut its Mutanda copper-cobalt mine in the DRC, which then resumed operation in 2022.
That said, leading miners might be able to withstand a lower price for cobalt hydroxide than they were able to in 2019 due to current price momentum for copper and nickel – the main-product of the cobalt mining assets.
Copper and nickel prices in 2022 were about $2,000 and $13,000 per tonne higher than in 2019.
Nevertheless, some annual cobalt hydroxide contracts of 2023 have been sighted between miners and cobalt consumers.
Meanwhile, the contract pricing is linked to downstream cobalt sulfate price instead of raw cobalt metal price, according to multiple sources from refineries directly involved in the negotiations.