Civil unrest in South Africa, a third wave of covid-19 and supply curbs in the Democratic Republic of Congo may push cobalt prices up to $25 per pound through 2021 from the current average of $23.94 per pound, according to a new report published by Fastmarkets.
Author William Adams, head of commodity markets research, believes that continued protests in South Africa – a major transportation route for cobalt mined in the DRC – may hinder miners’ ability to deliver their product to international customers, thus affecting supply.
More than 70 people were killed during a series of riots that started on July 8, 2021, after former leader Jacob Zuma turned himself to the authorities to serve a 15-month jail term for contempt of court.
The violent demonstrations put resource companies operating in the country under alert, with Glencore describing the situation as a “force majeure event” in a letter to customers about cobalt and a number of other ores, alloys and metals exported from the country, although it was not a declaration of force majeure.
Another factor that could be bullish for the price is if the DRC authorities step in, as is their intention, to buy the cobalt ores produced by artisanal and small-scale miners
“In a notice to customers on Wednesday, July 14, seen by Fastmarkets, the trader-miner warned that ongoing violence in South Africa could potentially prevent them from fulfilling contracts with customers,” Adams wrote in the report. “Glencore’s warning highlights the potential for supply disruptions due to civil unrest.”
In the analyst’s view, another factor that could be bullish for the price is if the DRC authorities step in, as is their intention, to buy the cobalt ores produced by artisanal and small-scale miners.
“The Entreprise Generale Du Cobalt (EGC) was set up to ensure a responsible sourcing standard, to regulate ASM mining and to buy ASM produced cobalt. Key will be whether the EGC tries to influence prices by holding back material from the market,” the review states. “At these price levels, we would imagine the state would be more interested in getting the revenue. For now, we do not expect this to get in the way of supply, although bureaucracy may well cause some delays.”
A third wave of covid-19 fueled by the Delta variant in the Democratic Republic of Congo is also seen by the Fastmarkers expert as a possible element of concern because even though earlier waves had little impact on mining, this mutation is on the rise throughout Africa and is causing serious illness in young people.
“If we see anything like the impact of Covid-19 on South America’s base metals mines in summer 2020, the cobalt industry could be in for a bumpy ride,” Adams said.
In terms of demand, the market analyst predicts it will go up, particularly after China released strong NEV data that showed 1.2 million plug-in electric vehicles were sold in the first half of the year, while the EU’s EV registrations have also held up well despite a semiconductor shortage. In fact, Fastmarkets data-gathering shows that battery-only EV registrations totalled 210,298 cars and plug-in hybrid totalled 235,730 cars, which are well above 2020 levels.
“For the first half of the year, plug-in EV registrations totalled just short of 900,000 vehicles,” the document reads. “Given Europe’s preference for NCM batteries, the robust numbers bode well for cobalt demand growth.”