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Cobalt market faces tough 2024 as oversupply and falling demand prevail

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By Colin Hay - 
Cobalt price weakness 2024 oversupply mining resources metals

A number of international research firms are tipping a difficult year for cobalt stocks with oversupply and sliding demand continuing.

2023 was a turbulent year for the metal, according to energy research firm Wood Mackenzie.

As a result of elevated stocks and lacklustre demand, the annual average benchmark price fell to around $23 a pound, halving the level of 2022.

“With no quick fix to the oversupplied situation, the ‘cobalt blues’ are set to continue into 2024,” Wood Mackenzie said.

However, the company noted that it is not all doom and gloom.

“The alloy-grade cobalt market will be one bright spot while returning smartphone demand and rising supply-side risks should keep the price from going into freefall.”

S&P Global bearish

Fellow research firm S&P Global believes oversupply will mean low prices for cobalt will persist in 2024 as demand slips, impacted by an increasing number of battery producers turning to more affordable options.

S&P reported there was a cobalt deficit of 8,000 million tonnes in 2021.

According to S&P Global Commodity Insights research, this led to mining companies ramping up production to meet demand from the electric vehicle (EV) sector.

As a result, the cobalt market recorded a surplus of 3,000Mt in 2022.

“But the production increase came alongside a shift by some automakers toward replacing cobalt in their batteries, turning to cheaper alternatives,” S&P Global noted.

“Battery producers have also started moving away from the metal to avoid human rights issues and environmental problems linked to cobalt mining in the Democratic Republic of Congo, where safe practices have been a challenge.”

“We expect 2024 to continue with relatively low market prices,” David Sturmes, head of corporate engagement and partnerships at the Fair Cobalt Alliance, a cobalt supply chain trade group, told S&P Global Commodity Insights in an email.

“However, if and when EV demand picks up pace, we believe that prices will once again increase but most likely not reach historic highs.”

Refined cobalt supply growing

Refined cobalt supply is expected to grow 15.8% year-on-year to 257,000Mt in 2024 from an estimated 222,000Mt in 2023, according to a November report by S&P Global Commodity Insights’ metals and mining research team.

According to a separate November S&P Global Commodity Insights research report, however, exploration budgets have expanded with cobalt recording a third year of marginal increases.

Cobalt exploration budget allocations to Australia rose by 78% for 2023.

“There is an increase in cobalt capital allocation across both our monthly financing data (cobalt financing up 153% year-on-year in the first 10 months) and the annual corporate exploration budgets (cobalt budgets up 4% in 2023),” S&P Global Commodity Insights senior analyst Alice Yu noted.