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China stockpiling of Cobalt has seen it's prices soar, rising by about 65 per cent since January. Cobalt is used in batteries for electric vehicles, as well as smartphones, tablets and laptops. China is the world’s biggest importer of cobalt, buying about 95,000 tonnes of it every year.

Cobalt Mining DRC

Chinese companies continue to ship cobalt hydroxide from Africa, but there have been delays which have helped drive tightness in the market analysts say.  A tonne of the metal sold for US$52,6100 in March on the London Metal Exchange, its highest level since December 2018.

The price rally started late last year when China’s State Reserve Bureau announced plans to stockpile cobalt because of a boom in sales of electric vehicles in China and Europe. The Democratic Republic of Congo (DRC) produces about two-thirds of the world’s cobalt reserves of about 7 million tonnes, about two thirds of them in the DRC. and the instability of the Central African nation has lead to decisions to stockpile. Supply shortages caused by logistical issues and fears of political instability overhang.

With Blood Diamonds fresh in our minds there are concerns about the ethical sourcing of cobalt, allegations of the use of child labour in mines has been at the forefront of concern. The impact of the Covid-19 pandemic has also slowed the movement of goods through the supply chain like so many other goods.  In an unstable nation like the DRC this is even more strained. Three Chinese nationals were killed in the Democratic Republic of Congo mine attack 6 Apr 2020.

Chinese companies continue to ship cobalt hydroxide to China from Africa, but there have been delays which have helped drive tightness in the market in further.  About 70 per cent of all globally mined cobalt is transported between the DRC and China via ports in South Africa, problems arose in January when Pretoria closed them in a bid to contain a new strain of the coronavirus. Freights costs have soared with a lack of vessels to transport the materials, high shipping costs, and limited capacity at ports and a shortage of trucks in China added to the logistical problems.

China Molybdenum owns the world’s second-largest cobalt mine, Tenke in the DRC and also recently bought the Kisanfu resource from Freeport McMoRan for US$550 million. Other Chinese firms operating in the DRC include Huayou Cobalt, Chengtun Mining, Wanbao and CNMC. China’s battery production figures rose by more than 300 per cent year on year in January.  Several metal producers in China, notably Huayou Cobalt and Yantai Cash are scaling back production to focus on cobalt chemicals due to the strength of downstream demand from the battery industry.

The premium for cobalt sulphate [refined cobalt product] over metal across February also influenced decisions. While these are not significant volumes and the reduction in metal production was not expected to have a significant impact on the market it is one more point of demand. With supply constraints and the constant demand for electric vehicles, smart phones and tablets cobalt market was likely to be quite vulnerable over the next five years.

Prices will be dependant on mining projects in Indonesia and the DRC which carry various risks. Cobalt supply is expected to remain tight over the coming months, and due to strength of battery demand and supply risks and rising freight costs.

Source: Reuters, TC, Baltic News

From The TradersCommunity Research Desk

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