Long-suffering cobalt bulls received some good news on Wednesday with new data showing prices for the battery raw material rebounding at the start of 2020.
According to Benchmark Mineral Intelligence, a battery supply chain and price reporting company, domestic Chinese prices cobalt sulphate prices jumped by more than 10% in January to $6,900 a tonne.
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Measured from multi-year lows hit during the summer, prices for cobalt used in the battery supply chain have recovered 30%.
Cobalt hydroxide and cobalt battery metal prices also improved at the beginning of the year during the month as Chinese battery manufacturers stocked up ahead of Chinese new year celebrations.
With low stock process levels in China even a relatively short disruption beyond this date could have a significant impact on supply
The London-HQ researcher said sentiment has improved in China thanks to indications that subsidies for electric vehicles would not be cut again this year and persistent rumours that Beijing is poised to add substantially to stockpiles of the critical raw material held by its State Reserve Bureau.
China is responsible for every other EV sold around the world and changes to subsidies for hybrid and battery-powered vehicles – or new energy vehicles in local parlance – that came into effect mid-June had a dramatic impact on the domestic market.
Annual EV sales in 2019 dropped for the first time ever to 1.21m units, compared to 60% growth in the previous year.
Benchmark notes growing concern about the impact of the coronavirus should activity be curtailed for a prolonged period after market activity restarts February 10:
The current planned closure period is unlikely to affect logistics, but with low stock process levels in China even a relatively short disruption beyond this date could have a significant impact on supply.
Shaping supply
Annual cobalt production is only around 130,000 tonnes, mostly as a byproduct of nickel and copper mining.
Some two-thirds of supply comes from the Democratic Republic of the Congo, where fears about political instability and the challenges of ethical sourcing combine to supercharge supply concerns.
Cobalt production in the DRC fell by just under 20% to 87,676 tonnes last year according to central bank figures released on Wednesday.
The central African nation announced last week the establishment of a new state company to manage the country’s artisanally mined cobalt.
The new company, Entreprise Generale du Cobalt, would be managed independently by state mining company Gecamines and could seek a private partner for the venture to help fund purchases from small-scale miners.
Benchmark estimates that in 2019, less than 10% of cobalt supply came from artisanal mining, but the figure fluctuates depending on the cobalt’s price environment.
Caspar Rawles, Head of Price Assessments at Benchmark said DRC artisanal cobalt production has historically acted as swing supply in times of market tightness, typically as a reaction to rising or higher prices:
“The government intervention in this supply chain may inhibit the ability of DRC supply to respond as quickly to market tightness, and may see higher prices sustained for longer in such times.”