The worth of cobalt has soared greater than 30 per cent since Glencore introduced this month it could shut the world’s largest mine for the battery steel, providing hope for a sector whose shares have been hit by fears over a worldwide recession.
The rise of electrical vehicles propelled cobalt to its highest stage in 10 years of $44 a pound in April final yr, earlier than crashing to $12 following a surge in provide and stockpiling by corporations within the battery provide chain.
Glencore, the world’s largest producer of cobalt, stated early final week that it could shut its Mutanda mine within the Democratic Republic of Congo on the finish of this yr, saying mining the steel was now not “economically viable”. Since then, cobalt costs have risen virtually one-third to commerce at $16 a pound on Friday, based on Fastmarkets.
The closure was “positively wanted to stimulate long-term funding in cobalt provide,” stated George Heppel, an analyst at consultancy CRU in London. “With cobalt at $12 a pound that was not enough to maintain the market properly equipped in the long term.”
The worth rise will come as a reduction to cobalt miners, whose shares have suffered from rising fears a few international financial slowdown following US President Donald Trump’s determination to impose 10 per cent tariffs on $300bn price of Chinese language exports in July.
Shares in Glencore have slipped 23 per cent this yr, hitting their weakest stage since October 2016 this week. JPMorgan analysts downgraded their score on the inventory to “underweight” late this week, saying the US-China commerce struggle might threaten the miner’s dividend by hitting commodity costs.
The DRC is the world’s largest producer of cobalt, which the nation mines alongside copper. However a surge in provide from new mines and an inflow of small-scale miners has been one of many key causes behind cobalt’s worth crash.
Cobalt demand from smartphone makers has additionally slowed as the worldwide market reaches saturation. Cell phone gross sales fell 5 per cent in China within the first seven months of this yr, based on CRU.
However costs are more likely to rise additional, stated Mr Heppel, because the closure of Glencore’s mine shifts the worldwide market from surplus to deficit subsequent yr.
Aside from Mutanda, Glencore additionally produces cobalt from its Katanga mine within the DRC, in addition to its Murrin Murrin deposit in Australia and nickel operations in Canada.
Carmakers are attempting to scale back the quantity of cobalt of their batteries due to the dangers of supply-chain disruption, however that fall is more likely to be offset by progress in demand for electrical vehicles, based on Benchmark Mineral Intelligence. Cobalt is essential for battery security in lithium-ion batteries, which might catch fireplace due to the flammable electrolyte.
BMW in April agreed to purchase cobalt for its batteries from Glencore’s Murrin Murrin mine in Australia.