During and around the congress 3 key themes and topics continued to emerge.

1. Price – Economics 101 would tell you that low prices solve low prices. You would also be taught the importance of supply and demand balances in determining prices. However, the cobalt market conflicts with these rules as prices have not recovered and appear not to rise anytime soon. Despite the cobalt market remaining in a state of oversupply, more material continues to come online, driven mostly by cobalt as a by-product of nickel and copper production. This would suggest prices may not recover within the short term.

Many conversations in meetings surrounding the congress discussed the possibility of a bifurcation of cobalt pricing, given that the current market benchmark does not reflect how the majority of the cobalt market is traded, either due to location or due to an ESG or green premium that some western producers are trying to negotiate because of their higher level of ESG credentials, compared to the DRC or Indonesia. However, the market does not appear to be mature or liquid enough to warrant a new exchange-based contract price. Whilst at the Cobalt Congress, the US also announced increased tariffs on Chinese critical material and minerals, including a 25% tariff on cobalt, which might lead to a diversification in pricing.

Source: Project Blue’s April 2024 EV & Battery Monthly Service.

2. Geopolitics – Being in the USA and discussing cobalt, a market dominated by the DRC for mined supply ~70% and China for refined supply ~75% (according to Project Blue’s Cobalt Market Service)has raised several questions and comments about the role of the Inflation Reduction Act, the differences between US and Chinese investment in Africa, and ultimately what it means for the end consumer. Speaking with industry participants from the DRC and China paints a very different perspective than what we are used to hearing from mainstream Western press. DRC contacts have questioned why they should prefer US investment whenever the market changes or a new political regime takes over. Whereas Chinese investment continuously flows in without hesitation, driven by the Chinese companies trying to secure more primary copper supply. A rhetoric that is hard to compete with. With the US imposing a 100% tariff on Chinese EVs this week, a potential pushback could make buying a US-based EV harder and more costly.

Additionally, many industry participants expect the US to increase its national cobalt metal stockpile by the end of the year driven by a combination of geopolitics and supply concerns around the cobalt demand from the defence sector. This decision has not yet been confirmed but market sentiments expect a boost in metal prices once actioned. Cobalt for the superalloy aerospace market is the one market area where there is reason to be optimistic as pricing has remained buoyant and demand is set to remain strong over the coming years. This is due to existing fleets requiring maintenance, new jet engines being built, and an increase in commercial aircraft deliveries.

3. End-use – As mentioned above, the end-use market for cobalt has a significant impact on prices. However, if you are hoping to capitalise on the incentives in place for US-based EVs your options for refined cobalt supply are very limited. For instance, if you are a US-based OEM purchasing IRA-compliant cobalt, your options for processing it are highly restricted as there are currently no operational cobalt chemical producers in the US. Several junior companies in North America are looking to fill this supply chain gap in the coming years, but planned project capacity will not meet US cobalt demand in the foreseeable future and there is no guarantee of development or a timeline for when they may commence production. Investment in the mid-stream has also not kept pace with the downstream and these bottlenecks will likely cause issues in the coming years. Batteries, particularly in the EV end-use market, are by far the largest for cobalt consumption. Therefore, cobalt supply chain diversification is required in the short-medium term to alleviate market constraints.

For a detailed analysis of the cobalt market, you can find out more information about Project Blue’s Cobalt Market Service here.

17

9

14

19

24

3

1

19

30