2016 saw the rise of lithium, but in 2017 it may be time for its friend in the battery market, cobalt, to shine. Cobalt plays a part in lithium-ion batteries for a longer battery life, making it a desired addition, especially for batteries in electric vehicles. If you missed out on investing in lithium, you should consider investing in cobalt.
Right now is the prime time to invest in cobalt, as prices haven’t been this high since 2011, and is projected to grow higher. As demands for electronics continue to grow but supplies dwindle, the rise in cobalt prices is justified, explains Colin Hamilton, a Macquarie Research analyst. Hamilton takes particular interest in China’s dependency on the Democratic Republic of Congo for cobalt due to the fact that little to no mines are in China. The DRC poses a risk for those investing in cobalt, as the instability of the nation and dubious supply chain brings forth the possibilities of an unsteady production and market.
At the same time, however, China’s inclination for higher-quality batteries can bring great profit to its new energy vehicle market. This profit could be worth the risk for those wanting to invest in cobalt.
With technological advancements on the demand side, and geopolitical concerns threatening the supply side, Hamilton thinks it’s finally time for cobalt to shine in the metals market. He notes the height of cobalt prices in 2007 ($50/pound, U.S.) and how it fell 50% at the end of the global financial crisis. As other metals recovered from the crisis, cobalt fell lower and lower, resulting in U.S. $10/pound by the end of 2015. No one even thought of investing in cobalt. “There has been a long wait for cobalt prices to start moving upwards in a conspicuous fashion,” Hamilton said; prices for the metal are now above US$17, a recovery that has persisted since July 2016.
An important fact to note for those wanting to invest in cobalt, or are investing in cobalt, is that Hamilton pointed out, the prices of the metal has moved to match — and even exceed slightly — the prices of cobalt chemicals. As well, Hamilton noted, Chinese cobalt tetroxide prices have doubled since mid-2016, indicating that demand for batteries is rising.
Investors may be slightly confused about the sudden rise, but Hamilton explains that it has to do with the recovery of the electronics market, citing the smartphone market growth in the second half of 2016 after a weak first quarter.
“With strong expectations of growth in rechargeable batteries and energy storage, and cobalt having lagged lithium pricing significantly, it is viewed as the catch-up trade,” the Macquarie Research analyst said.
Thus, it is suggested that those investing in cobalt or wanting to invest in cobalt, to look at the wider market of portable electronic devices and electric vehicles to gain a better judgment of the cobalt market.
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