Cobalt Prices Under Pressure from Surging Chinese Output

The cobalt market is facing oversupply issues that could further depress prices through the second quarter of 2024 and beyond. Rising Chinese cobalt metal production and muted demand are the primary culprits behind the oversupply situation. 

China is expected to bring an additional 9,000 metric tons of new cobalt metal capacity online in the second half of this year. This comes as Chinese refined cobalt output is projected to soar 319% from 2021 levels to reach 30,400 metric tons in 2024, flooding the market.

Analysts at S&P Global Commodity Insights anticipate the global cobalt metal market will remain in surplus until at least 2026, putting downward pressure on 2024 spot prices. Some cobalt sulfate refiners have even switched to producing cobalt metal due to potentially higher profit margins from lower production costs.

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The oversupply has already impacted cobalt hydroxide spot prices, which hit a record low in Q4 2023 before rebounding modestly in Q1 2024. As of mid-April, hydroxide prices remained 22% lower than the prior year.

However, there are some bright spots amid the bearish market conditions. Demand for cobalt sulfate from nickel-manganese-cobalt batteries in electric vehicles is expected to grow, comprising 56.4% of total forecasted cobalt chemical demand in 2024 as plug-in EV sales rise 30%.

Additionally, tight alloy-grade cobalt availability and elevated shipping costs stemming from geopolitical tensions could provide some price support for the cobalt metal market this year.

Information for this story was found via S&P Global Commodity Insights, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.