• 16 hours From Frenzy To Flop, The Death Of This Year’s Most Hyped IPO
  • 21 hours Are Smart TVs Spying On Us?
  • 23 hours Is Fossil Fuel Divestment A Waste Of Time?
  • 2 days A Russian Billionaire’s Space Quest To Save Humanity
  • 2 days Markets Take Breather As Consolidation Continues
  • 2 days Economic Woes Weigh On Copper Prices
  • 2 days World's Largest IPO At Risk Following Drone Strikes
  • 3 days Gold Is Beating Buffett’s Berkshire Hathaway
  • 3 days What’s Behind The Silver Sell-Off?
  • 3 days The Retail Apocalypse Is Accelerating
  • 3 days The Top Tech Stocks Of The Year
  • 4 days America’s Workforce Elderly Workforce To Double By 2028
  • 4 days Toyota Tests Solar-Powered Prius
  • 5 days Why The Gold Rally Flatlined
  • 5 days The Uranium Sector Can’t Catch A Break
  • 6 days Upcoming Fed Meeting Has Investors On Edge
  • 6 days Global Gold Sector Outlines Responsible Mining Principles
  • 7 days China’s Giant Vampire Fund Loses $120B
  • 7 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 7 days Savvy Investors Are Betting Big On This Little Data Company
Tackling Lithium Batteries' Biggest Problem

Tackling Lithium Batteries' Biggest Problem

Lithium metal batteries fail when…

Are Copper Naysayers Missing The Big Picture?

Are Copper Naysayers Missing The Big Picture?

The price of copper came…

Lithium Hype Can't Live Up To Supply Realities

Lithium Hype Can't Live Up To Supply Realities

Refinery bottlenecks and the potential…

Oilprice.com

Oilprice.com

Writer, OilPrice.com

Information/Articles and Prices on a wide range of commodities: We have assembled a team of experienced writers to provide you with information on Crude Oil,…

Contact Author

  1. Home
  2. Commodities
  3. Industrial Metals

Why Did Cobalt Just Crash By 40%?

Cobalt Crash

If you want to teach someone the boom-bust nature of the mineral commodity industry, the story of cobalt over the last few years would be a perfect example. The metal, which is used in lithium-ion batteries to stabilize them, recorded several years of rising prices until last year it began to slide down eventually hitting multi-year lows. How did this happen?

The answer is easy enough since it follows the classic industry price pattern, as detailed by Bloomberg’s Mark Burton. The EV hype that unlike so many other hypes actually transformed into a real race to bring more electric vehicles to the market sparked a cobalt mining frenzy that boosted supply more quickly than the EV revolution took off. This revolution, by the way, still hasn’t taken off and is shaping up to be more of an evolution than revolution: a fact that’s added its own weight to cobalt prices.

After an early 2018 cobalt hit a 10-year high trading at an average of US$100,000 per ton in the first half of the year, between last November and this February, the metal dropped 40 percent. Now, it is trading at barely above US$30,000 per ton. The bust has come, brought about by a rush to mine as much cobalt as possible and sell it to the Chinese: China accounts for 65 percent of the world’s lithium-ion megafactory capacity.

So, one reason was the EV rush. Another, however, had to do with where cobalt is most abundant. That’s the Democratic Republic of Congo and its notorious political instability has served as another booster for the price of the metal.

There is also one more rather unique factor that has contributed to the rout: artisanal cobalt mining in DRC. People there are literally mining cobalt in their backyards. That’s a dangerous endeavor in the absence of specialist mining equipment and protective gear but the practice has proved unstoppable.

The fact a single country—China—is home to more than 50 percent of battery production capacity helped as well. Cobalt just became one more metal whose price fluctuates every time China releases economic data. Related: Medical Bankruptcy Is Killing The American Middle Class

What’s more, there was a hoarding element to cobalt’s rise to prominence. Benchmark Minerals’ cobalt expert Caspar Rawles explains, as quoted by Edward Niedermeyer in a story for The Drive, “The Chinese were also buying more than they needed because they were stockpiling it and it was going up in value every month so they were making paper profits... which ended up being part of their undoing in 2018."

Even so, the rout now seems to be over. Prices have bottomed out and analysts expect them to start climbing up again as demand remains strong. That’s the good thing—or bad thing, depending on perspective—about fundamentals. If these are strong, any price crash would be a temporary headache. With weak fundamentals, we get the new normal in oil prices.

Yet cobalt has strong fundamentals: demand will remain robust as the EV industry gathers pace, albeit more slowly than initially expected. Government regulations, notably in China but also in other countries, will serve as a major boost for electric car adoption and whatever boosts EVs will boost battery metals.

The cobalt market is already self-regulating. Artisanal mining in Congo has declined along with prices, so there is less supply coming into the market. At the same time, carmakers are pushing ahead with their ambitious EV plans. Whether these will unfold as they expect remains to be seen, but cobalt will continue to be in demand, even if this demand grows more slowly than optimists expected at the height of the EV hype.

By Irina Slav for Oilprice.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment