During Benchmark’s most recent cobalt webinar, Glencore made the first public confirmation outlining more detailed plans for the restart of its DRC based Mutanda Mining copper-cobalt operation following a period of care and maintenance, with the webinar being held as part of the Cobalt Institute Conference on 19 May 2021.
The plan to shutter the operation was taken in August 2019 following an extended period of low prices. At the time cobalt hydroxide – the product produced by the Mutanda operation – was trading at an average of $20,000/tonne (CIF Asia) as assessed by Benchmark.
Following the August 2019 announcement, production at the mine ceased in December 2019 with the operation producing 25,100 tonnes of cobalt in that year.
Since then, following favourable EV policies put in place by governments globally as part of the COVID-19 pandemic recovery, the industry has seen rapidly increasing demand for the battery mineral under a backdrop of surging EV sales. Cobalt prices began their recovery in late 2020 with cobalt hydroxide (CIF Asia) currently up by 125.1% versus August 2019 in the most recent April Cobalt Price Assessment, averaging $44,025/tonne for the month.
This combination of rising prices and tightening supply due to strong demand will likely have been the key factors in Glencore’s decision to bring Mutanda out of care and maintenance.
Ash Lazenby, Cobalt Trader at Glencore officially confirmed the company expected the operation to begin production in 2022 and as things stand the current production plan will see volumes rising to approximately 20,000 tonnes of cobalt by 2025, highlighting a gradual but steady ramp as market demand increases.
Whilst the confirmation is a significant announcement for the market, the production plan is in line with Benchmark’s most recent cobalt forecast which anticipated production to reach 19,000 tonnes by 2025 following restart in 2022.
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.
Whilst it is yet to be seen how the market will react to the announcement, in Benchmark’s opinion the outlined production plan is unlikely to see oversupply in the market, with much of the material likely destined to be locked up in long term contracts with key consumers looking to secure supply.
The lithium ion battery supply chain is undergoing a fundamental shift as previously theoretical forecasted EV consumption translates to real demand and as global automakers start to sell larger proportions of their fleets as electric vehicles.
As such, the battery supply chain continues to evolve via changing cathode technology and increasing commitments from producers to help the supply chain meet the increasing demand from consumers.
In reality, the entire value chain will need to work together to do what it can reduce the risk of raw materials being the limiting factor of the energy transition.
This commitment from Glencore will likely be one of many that will be needed to ensure supply growth can match the trajectory of increasing demand.
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