‘Cobalt rally far from over’

Bloomberg

Tight cobalt supplies will keep boosting the price of one of this year’s hottest commodities, according to Eurasian Resources Group S.a.r.l., which is developing an almost $1 billion project in the Democratic Republic of Congo. Cobalt jumped 71 percent this year on surging demand for the metal used in batteries for electric cars made by firms such as Tesla Inc. It may rise another 60 percent to as much as $90,000 a metric ton in the next 18 months or so, said ERG Chief Executive Officer Benedikt Sobotka. He said clients are already asking to pay fixed prices for supplies from the mine, which isn’t due to start until late 2018.
Demand surged after usage expanded from mobile phones to larger batteries in cars and homes, prompting concern supply won’t keep up. Sobotka’s view echoes that of Glencore Plc’s billionaire chief Ivan Glasenberg, who last month said the electric vehicle boom is coming faster than expected. ERG plans to initially produce 14,000 tons a year from its Metalkol Roan Tailings Reclamation project in the DRC and eventually leapfrog Glencore as the top producer.
“Demand is remarkably strong,” Sobotka said in an interview in Moscow. “People are inquiring about lifetime offtake contracts” from ERG’s project for 2018-2019, he said. Cobalt, which rallied 37 percent in 2016, traded at $56,500 on Friday, according to Metal Bulletin Ltd. This year’s advance has far exceeded gains for most major commodities. While analysts such as those at CRU Group expect further price gains, Morgan Stanley last month said more supply from the DRC, where the bulk of production comes from, will start putting pressure on prices next year.
ERG’s Sobotka isn’t worried, and sees any excess supply being “quickly eaten.” “Over the last 12 months the market participants have realized that there was a lot of dirty cobalt product that is produced using child labor in the DRC” and outdated technology, he said.