Congo Produces Less Cobalt, Prices Continue to Jump
This is a short follow up to our stories on Lundin Mining, the Congo and the fate of cobalt. It has been our investment thesis that demand for cobalt will continue to increase as more electric vehicles and lithium ion batteries are produced. Cobalt is up roughly 40% since the end of February 2016 on the London Metals Exchange, a clear sign that the most fundamental law of economics is alive and well. As the supply drops and demand increases, prices take off.
The quick update is more data that supports this thesis, and predicts further increases in cobalt prices. Last week the Congo’s central bank reported that, “Production of cobalt, the metal used in lithium-ion batteries and of which Congo is the world’s leading producer, slipped 0.8 percent to 21,493 tonnes in the third quarter and is down 9 percent so far this year”.
The global production of cobalt is a fragile 100,000 tonnes a year. So if the Congo produces roughly 55% of the world’s cobalt, and production there is down 9% this year so far, that means the world lost roughly 5,000 tonnes of supply. This is in addition to the cobalt that will be lost out of the Philippines as nickel mines close for environmental reasons.
The best guestimates are that the world will lose roughly 10,000 to 18,000 tonnes in 2017, with demand punching upwards. The call on cobalt is not that it’s going up; the real call is, how high will it go and for how long?
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Mr. Clausi is an experienced investment banker, executive and director. A graduate of Osgoode Hall Law School called to Ontario's bar in 1990, Mr. Clausi ... <Read more about Peter Clausi>