BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

IF you are a Platts Market Center subscriber, to reset your password go to the�Platts Market Center to reset your password.

In this list
Metals

Feature: Cobalt disruption could prevent surplus next year and support pricing: mining executive

Oil

OPEC/non-OPEC deliver a nail-biter in Vienna

Metals | Non-Ferrous | Steel

Platts Market Data - Metals

Metals | Steel

15th Annual Steel Markets North America

Metals | Steel

Analysis: Steel industry has concerns on iron ore pellet pricing using 65% Fe index

Feature: Cobalt disruption could prevent surplus next year and support pricing: mining executive

New York — News that Katanga Mining's 75%-owned Kamoto Copper Company subsidiary has suspended sales and shipments of cobalt from the Democratic Republic of Congo because of uranium contamination could prevent a temporary surplus in 2019 and help push cobalt prices to a level to encourage new production, a cobalt mining executive said this week.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Kamoto, which is in a joint venture with DRC state-owned Gecmines, was expected to produce around 34,000 mt of cobalt next year, according to Katanga's guidance. This, along with around 14,000 mt expected from ERG in 2019, was likely to result in a small surplus of cobalt in 2019, ahead of an expected ramp-up in cobalt demand for batteries in electric vehicles from 2020 onward, Troy Nazarewicz, investor relations manager at Canada's Fortune Minerals, a former producer and now a development stage mining company, said in an interview with S&P Global Platts this week.

In March, Katanga agreed to sell cobalt hydroxide with 42,800 mt of contained cobalt over 2018-2020 to Chinese battery recycler GEM. Under the terms of the agreement, GEM said at the time that its three subsidiaries in Hubei, Jiangsu and Hong Kong would receive cobalt hydroxide with 3,800 mt of contained cobalt in 2018, 18,000 mt in 2019 and 21,000 mt in 2020. Since Tuesday's suspension announcement, market sources have speculated that Katanga is likely to fulfill the contractual requirements in 2019 using stockpiled material not affected by the uranium contamination or use other supply sources and the contract would not be affected by this issue. Glencore, one of the world's largest producers of cobalt, owns 65% of Katanga, and spokesman Charles Watenphul declined to comment on how the contract would be fulfilled, other than saying Katanga's copper production was unaffected by the uranium contamination.

Nazarewicz said without the interruption at Katanga, there was a possibility of the global cobalt market seeing a surplus in 2019 and depressing prices. This would have delayed "further investment in new production, so you get to a point in the early 2020s where demand for cobalt in batteries for EVs is rising rapidly, with no new cobalt coming on and you end up with a significant deficit."

With a "pinchpoint" coming, he said mining companies and original equipment manufacturers may choose to stockpile the surplus so it would have a muted effect and have material for the 2022 electric-vehicle ramp up.

But the market could now be looking at a deficit in 2019, instead, Nazarewicz said. "So, [while] the long-term pricing outlook is strong, the near-term was not, but that maybe about to change."

He said the market needed higher cobalt prices for a longer period of time balance the market.

He also said battery recycling would be a part of the solution to ensure future cobalt supplies for battery usage. "But the economics of this is dependent on value of the materials recovered," he said. "I don't know what the necessary cobalt price is to make it economic. ... Perhaps metal prices north of $30/lb? Or is it $50 to incentivize recycling? It probably is above $40." While physical cobalt prices have been above $30 all of this year, the market had gone through lengthy periods of depressed pricing, despite average cobalt demand growth of 6% a year over the last 20 years as it is primarily a byproduct of copper and nickel mining, with supply therefore influenced by the economics to mine these two metals and not strictly by the price of cobalt, Nazarewicz said.

New copper and nickel production coming on stream in 2014 and 2015 led to significant cobalt surpluses. This also coincided with a round of raw materials destocking by aircraft manufacturers and their original equipment manufacturers, cutting demand for nickel/cobalt-based superalloys in jet engines, despite multi-year order books at the major civil aircraft makers, such as Boeing, Airbus and Embraer, according to market sources.

According to Platts data, physical high-grade cobalt cathode prices began 2015 at $14.20-$14.80/lb, but finished the year at under $10, a level considered to be below production costs. The market remained depressed in 2016, trading between $10 and $11.50/lb until September 2015, when prices rose above $15/lb. By the beginning of 2017, prices were $15.00-$15.70 and then more than doubled, ending the year at $36-$37/lb. The rally continued in the first quarter of this year, peaking in late March at $44-$45, about $5 shy of the all-time high of $50 seen in the first half of 2018. Prices have since slipped back to around $36.

Even though lithium-ion battery manufacturers buy cobalt sulfate and hydroxide as their main raw materials for batteries, talk about the economics of battery recycling and mining still center around the price of metal, rather than the raw materials, although that may eventually change, according to Nazarewicz.

NEW PRODUCTION

New cobalt production was also dependent on pricing of nickel and copper, Nazarewicz said. This was a view also expressed by a Vale executive at last month's S&P Global Platts Battery Metals conference. While nickel is predominantly used in the stainless steel market, its use in battery chemistries is also on the rise and could soon match the demand of the stainless sector, according to some forecasts.

Paul Casbar, regional sales manager for the US for Vale, told the conference that more than $70 billion of investment in nickel mining was needed to bring new production to the market and more than $40 billion was needed in copper mining to meet future EV demand.

In the case of nickel mining, it would require prices "above $20,000/mt sustained to incentivize such investment," he said.

Asked why Vale and other mining companies had yet to make such investments, Casbar said mining companies, including Vale, had only just repaired their balance sheets and the industry was still "shell-shocked after two awful years." Nickel prices remained below $9,000/mt in 2016 and even dipped to below $8,000 at one point, according to LME data.

Nazarewicz said another consideration was that nickel and copper demand growth generally tended to only match global GDP growth, unlike cobalt.

Fortune Minerals' principal asset is its Nico cobalt-gold-bismuth-copper project in Canada's Northwest Territories, which, according to Nazarewicz, was discovered inhouse when a drill hole intersected the deposit in 1996. He said copper production would be "negligible" from Nico.

The company's website describes Nico as a fully vertically integrated project from mining and concentrating of ore, to transporting concentrate to Fortune's proposed Saskatchewan refinery for further processing into metal and chemical products.

Nazarewicz said if the company built the Saskatchewan refinery, rather than selling the concentrate to third parties, "we could have the flexibility to produce cobalt cathode or sulfate."

He said it would require a government all-season road to be built, linking the mine to Saskatchewan, and the road was advancing after recently receiving trilateral government approval. In addition, the company would link to that road by building its own 50 km spur road.

"That road seems to be moving ahead," he said.

He also said Fortune Minerals was looking at different options for financing and had 35 confidentiality agreements with potential strategic partners. He said traditional banks were "also in the mix."

Construction would take about two to three years, bringing it on stream at the time when the ramp up in EV production is expected to really gather momentum.

An update to a previous feasibility study is underway, but based on a 2014 study, the mine is projected to have annual production of 1,615 mt of cobalt sulfate heptahydrate, 41,360 oz of gold dore bars, 1,750 mt of ingot and oxide, and 265 mt of copper metal. Nico contains an estimated 12% of the world's bismuth reserves.

Some 65% of revenue is likely to come from the cobalt, with gold and bismuth serving to lower the cash cost of production.

Last week, eCobalt Solutions said it expected to close financing for its proposed Idaho Cobalt project in the first quarter of 2019, with construction starting next spring.

The project is expected to produce the equivalent of 1,500 mt of high-purity cobalt sulfate annually over its projected 12.5-year life, the company has said.

Also last week, PolyMet Mining received its mining permit from the state of Minnesota for its planned Northmet copper, nickel and cobalt mine in the northeast of the state.

The mine is expected to produce 72 million lb/year (32,659 mt/year) of copper, 15.4 million lb/year of nickel, 720,000 lb/year of cobalt and 106,000 oz/year of precious metals in concentrate after it begins production in 2020. -- Anthony Poole, anthony.poole@spglobal.com

-- Edited by Annie Siebert, newsdesk@spglobal.com