Benchmark Mineral Intelligence: Glencore’s mine closure to cause tighter cobalt market and price increases in 2020

Dec 1, 2019

Glencore’s Mutanda mining operation in the Democratic Republic of Congo (DRC) has been placed on care and maintenance a month early, citing difficulties sourcing sulphuric acid needed to extract cobalt and copper.

First announced in August, the suspension of the operation was a shock to the electric vehicle supply chain and particularly to automakers already cautious of cobalt’s supply bottle necks.

Glencore’s Mutanda and Katanga operations in the DRC were expected to produce 39,000 tonnes of cobalt hydroxide in 2019, however, with the latest announcement this figure is likely to fall marginally.

However, the Mutanda operation is a significant source of cobalt supply and the suspension will see 20% of the world’s cobalt supply come offline.

Following the announcement that the mine would be placed on care and maintenance for a period of no less than two years the Benchmark Minerals’ Cobalt Hydroxide CIF Asia price saw a short-lived price rally.

Despite this, slowing Chinese EV demand and global economic uncertainty have seen much of these gains eroded in November as prices have continued to slide.

Although we have seen falling prices for most of 2019 a number of large supply deals have been announced between miners and refiners in the cobalt supply chain.

For instance, in May Umicore – having acquired the majority of Freeport Cobalt’s Kokkola refinery in Finland – agreed a cobalt supply deal with Glencore, which Benchmark Minerals estimates could account for up to 12,000 tonnes of Glencore’s supply per annum going forward.

Only last month Glencore revamped its supply deal with GEM co Ltd, which will see the cobalt producer supply cobalt hydroxide that equates to 61,200 tonnes of contained cobalt over five years from 2020.

Whilst the market is currently in oversupply, Benchmark Minerals expects the supply of cobalt raw materials, particularly cobalt hydroxide, to tighten in 2020 and stockpiles that have accumulated over the last 18 months begin to reduce.

The closure of Mutanda has been a key factor in bringing the market deficit forward, which could see sustained price rises from H2 2020 as demand from the electric vehicle and energy storage markets continues to grow.

https://www.glencore.com/