Restart of Glencore's cobalt mine 'critical' to supply chain, analysts say

Glencore PLC plans to resume operations at an idled cobalt mine in Democratic Republic of Congo as demand for the prized metal swells, inducing miners to accelerate production.

During a May 19 workshop hosted by the Cobalt Institute, Glencore cobalt trader Ash Lazenby confirmed the company will restart operations at its Mutanda mine in 2022.

"We do intend to bring that asset back online toward the second half of next year," Lazenby said of Mutanda, adding that annual production could reach 20,000 tonnes by 2025.

A spokesperson for Glencore declined to comment further.

Glencore stopped operations at the Mutanda mine and placed the facilities on care and maintenance at the end of 2019 after cobalt prices crashed amid increasing production from China and oversupply.

The price for the metal used in batteries and electronics has somewhat recovered, with the London Metal Exchange cobalt cash price at $19.78 per pound as of May 24.

Switzerland-based Glencore produced 27,400 tonnes of cobalt in 2020, according to the company, making it one of the world's leading producers of cobalt.

In an April report, S&P Global Market Intelligence analysts called the potential restart of mining activity at Mutanda "critical" to cobalt prices.

"The Mutanda restart decision is important to cobalt prices and balances because without the additional supply, the cobalt market would have seen an 11,000-tonne deficit, equating to 7% of global consumption in 2022 not being met," Market Intelligence cobalt analyst Alice Yu wrote in an email. A cobalt shortage would also cause a price surge, Yu added.

For now, Glencore's announcement appears not to have significantly influenced cobalt prices, Yu said May 25.

"The restart of the operation is fundamental to the cobalt market being able to supply the volumes needed by the battery industry to the mid-2020s, and even with the Mutanda operation back online, the market is expected to experience stock drawdowns and marginal deficits from 2023 onwards," Benchmark Mineral Intelligence analysts said in a May 19 report.

The level of cobalt demand will also depend on improved supply chain transparency, according to experts. Reported human rights abuses tied to cobalt mining in DRC have been a sticking point for the metal, leading some in the industry to turn to batteries with minimal to no cobalt.

The chemistry of electric vehicle batteries varies, but many batteries incorporate cobalt due to the longevity and stability it provides. That could change if cobalt-free batteries gain steam.

But even with the potential for the commercialization of batteries with low cobalt, Lazenby said demand for cobalt will still be high.

"Although cobalt is going to be a fraction of what it was years ago, the fact is that EV sales growth is just rising at a much stronger level, offsetting the impact you get from diminishing the amount of cobalt per battery," Lazenby said.