A battery minerals expert said uncertain supply from Congo has swung sentiment in cobalt producers' favor since Glencore PLC announced in August that it would shut down the world's largest cobalt mine at the end of 2019.
Citing a company letter, the Financial Times reported Aug. 7 that Glencore would put its Mutanda mine in Congo on care and maintenance due to falling prices and rising expenses, particularly costs of sulfuric acid, which was heavily used in operations.
While there was some hope that Glencore's decision would be reversed in the five-month window between the announcement and actual closure, Benchmark Mineral Intelligence senior analyst Caspar Rawles told the Perth, Australia, Benchmark World Tour on Sept. 20 that it was "very, very likely" to go ahead.
This was particularly the case given reports that the company had already started ramping down production and cut expat workers and external contractors.
Following Glencore's announcement, S&P Global Platts initially reported that Citi forecast refined cobalt prices would rise to the point where they average about US$38,000/t in 2020, amid a wave of trader and consumer de-stocking.
Citi sees strong demand growth coming from the electric vehicle sector and Congo supply risks making cobalt an attractive investment opportunity and expects that consumers, traders and even investors would be tempted to build cobalt stocks if global growth and trade war fears fall further.
London Metal Exchange cobalt rose from US$30,500/t in early August to US$36,500/t by Sept. 20, while Benchmark Mineral Intelligence's prices for cobalt metal, hydroxide and sulfate also started recovering in August, having plummeted from nearly US$100,000/t in the first half of 2018.

Rawles told delegates that the cobalt market turned for the worse in the first quarter of 2018 after a "big run-up" in cobalt prices.
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Benchmark Mineral Intelligence |
Benchmark Mineral Intelligence had not expected many new projects to get financed given the low prices prior to Glencore's Mutanda announcement and believed that the cobalt market would be oversupplied until about 2022, maybe 2023.
However, following Glencore's announcement, which will mean taking production out of the market for the two years Benchmark believes that Mutanda will be out of action, Rawles said "it looks like 2020 we'll be in a big deficit," then from 2021 onward "there's a question of how well supplied the market will be."
While prices will react, Rawles said that by the time Mutanda comes back online, cobalt demand would have grown enough that the resumption would not flood the market.
The only unknown factor is how quickly the other Congo operators can respond, but Rawles said there have been problems on that front.
Rawles noted that the ion exchange system Glencore's Katanga Mining Ltd. unit needs to install to remove uranium from its Kamoto project is not expected to be ready until mid-2020.
"Glencore is therefore expecting to have no production from Mutanda or Katanga's mine during the first six months of 2020, so they'll be reducing their stockpiles," which were key in driving prices down over 2018 and 2019, Rawles said.
He also cited Eurasian Resources Group SARL's Metalkol RTR project, which Rawles said has had problems ramping up, while Chemaf SPRL's new cobalt hydroxide refinery in Congo was also expected to come online this year but is now looking like it will not arrive until 2021.
Thus Congo's cobalt supply is "anything but certain, and we're looking at a tighter picture going forward than previously expected," Rawles said.
"Sentiment has begun to swing in producers' favor," he said, adding that 2020 contract negotiations have already been impacted.

