Cobalt supplies to swamp market, pressure prices further
By Pratima Desai
LONDON (Reuters) - Soaring supplies of battery material cobalt from the Democratic Republic of Congo will swamp the market creating a surplus and putting prices under more pressure this year and next, even though demand is expected to rise.
Global supplies of refined cobalt used in the rechargeable batteries that power electric vehicles are expected to surge to around 210,000 tonnes this year, up 24% from 2022, while demand is forecast to rise 8% to 205,000 tonnes.
Congo, the world's largest producer is expected to account for 180,000 tonnes of cobalt supply this year, up more than 30% from 2022, and around 225,000 tonnes in 2024.
Cobalt prices https://fingfx.thomsonreuters.com/gfx/ce/akpeqoykepr/aaa%20cobalt%20market%20balance.PNG
Liberum analyst Tom Price said persistent lockdowns in China and rampant inflation since the middle of last year have undermined demand for cobalt from the electric vehicle, industrial and consumer electronics sectors.
Price forecasts a cobalt market surplus of 5,570 tonnes in 2023 and 4,315 tonnes in 2024. He expects prices to average $54,840 a tonne this year and $50,320 in 2024, compared with $63,739 last year.
"Another important demand-side factor undermining cobalt's price performance is China’s electric vehicle industry cost-cutting battery strategy," he noted.
Cobalt market balance https://fingfx.thomsonreuters.com/gfx/ce/akpeqoykepr/aaa%20cobalt%20market%20balance.PNG
Sales and production of electric vehicles worldwide are set to increase again this year and next.
Electric vehicle sales https://fingfx.thomsonreuters.com/gfx/ce/lbpgglyazpq/aaa%20electric%20vehicle%20sales.PNG
However, Chinese battery producers are switching away from nickel, cobalt and manganese (NCM) chemistry to cheaper lithium iron phosphate (LFP) batteries, meaning cobalt demand will not grow exponentially as some had previously expected.
Outside China, the electric vehicle industry is also warming to LFP batteries while moving to higher nickel and lower cobalt batteries to boost the driving range from one charge.
Market share of LFP batteries https://fingfx.thomsonreuters.com/gfx/ce/egvbyoedepq/aaaaa%20Market%20share%20of%20LFP%20batteries.PNG
LFP chemistry accounted for more than 34% of the global electric vehicle battery market in 2022, around double the previous year, according to Rho Motion, which expects those numbers to rise to 37% and 39% in 2023 and 2024 respectively.
"The share of different battery types has changed significantly...The relative loser is cobalt although its use continued to grow," said Macquarie analyst Jim Lennon.
"LFP chemistry continues to make rapid gains, especially in China where 2022 market share was around 60%."
(Reporting by Pratima Desai; editing by Kirsten Donovan)