The Rise and Fall of Cobalt

It looks like Nelly Furtado was asking the right question after all. Flames to dust, lovers to friends hot cobalt prices to collapse, why do all good things come to an end?

What happened: The price of cobalt has fallen to its lowest point in two years, some 60 percent below last year’s peak, reversing almost all of the price gains realized between 2021 and mid-2022.

Cobalt is a key component of consumer electronics and rechargeable batteries and is largely extracted as a byproduct of copper and nickel mining. The demand for electronics during the pandemic sent the price of cobalt soaring.

Supply-demand, baby

Partially in response to high prices, the global supply of cobalt ramped up by some 23 percent between 2021 and 2022, bringing an additional 35,000 tonnes to market.

Unfortunately for producers, not only was demand for consumer electronics lower than expected (thanks inflation), but battery and EV manufacturers have been rapidly transitioning away from cobalt-based products.  

• This is due to the cost and performance of other battery types, alongside human rights concerns in the Congo, which provides some 75 percent of the global cobalt supply.

Global cobalt prices
USD per pound

The risk of change: One risk facing so-called critical minerals – including cobalt – is rapid technology change, particularly those minerals used in electronics.

A miner may bring on new production to take advantage of demand, only to find out that what started as a high-demand mineral, may no longer be as important after the latest technological breakthrough.

Pricing uncertainty: The business of mining, extracting, and refining raw materials for sale on an open, global commodity market is not for the faint of heart. Producers of oil, minerals, and even wheat all deal with a unique disadvantage relative to most other types of business: they don’t control the sales price of their products.

While regional differences do exist and fancy investments can be used to limit risk, producers can mostly just focus on keeping costs low and hope the market doesn’t act unpredictably (it usually does).

Zoom out: Despite the rapid collapse in cobalt pricing and the fall of other similar mineral prices, the long-term prospect of critical mineral extraction and refining remains bright thanks in large part to energy transition investments and rapid technology advancement across almost every sector.

• The Canadian Government’s Critical Minerals Strategy goes as far as saying that “critical minerals represent a generational opportunity for Canada’s workers, economy, and net-zero future”.

 For the miners out there, we hope you can keep holding on for the upswing.

+Additional Reading: China set to tighten grip over global cobalt supply

++Additional Reading: Battery metal prices fall back to earth