After years of falling prices and an oversupplied market, many experts are projecting 2017 to be the year for cobalt. Investors are falling over themselves to invest in cobalt as well as buy and trade cobalt stocks and cobalt futures before it is too late. Additionally, there was a dramatic rise in price that occurred — Metal Bulletin’s HIgh-Grade Free Market price for cobalt started at US$15/lb in the beginning of the year and by March it rose to be US$24/lb.
Why the sudden increase in price? Demand has increased due to cobalt being a key part in lithium-ion batteries, as well as its use in high-performance alloys, tool materials, and catalysts. However, there is an uncertainty when it comes to the cobalt supply.
Many are concerned at the fact that much of the world’s cobalt production comes from the Democratic Republic of Congo (DRC). The country’s political instability, infrastructure challenges, poverty, and violation of human rights are all concerns valid to the cobalt supply. Despite this, however, the DRC’s supply has grown to meet its recent demands, allowing for enough raw material to supply cobalt intermediates, refined metal, and refined chemical production.
Besides concern for cobalt production, there are also other reasons regarding supply for cobalt prices to rise so rapidly. One of the most important ones is that the number of suspensions/closing of mines (Katanga Mining (TSE:$KAT) in the DRC being a notable mention) has led to a tight metal market. This, along with strategic stockpiling, may have also been part of the inflation of cobalt price.
In February, the Financial Times reported half a dozen funds have purchased and stored an estimated 6,000 tons of cobalt; worth around US$280M. Countries such as China has also been stockpiling a significant amount of cobalt since 2014. It should be noted by those investing in cobalt or about to invest in cobalt that China yields the 2nd largest production of cobalt despite having little to no mining efforts.
With high demand, unstable supply, and speculative stockpiling, the price of cobalt could rise significantly more in 2017. In 2003, the price of high-grade cobalt was an average of just under US$11/lb, but due to undersupply and concern of future supply shortages as well as high global economic growth, the price grew to be over US$52/lb by March 2008. This was the peak price of high-grade cobalt.
However, it is important to note that one can never be too certain of market prices. Whether you are looking to invest in cobalt or already trading cobalt stocks and cobalt futures, never risk too much when it comes to the metal market; especially something as unstable as the cobalt market.
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