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November 24, 2015

Glencore's Cobalt Production Cuts Have Not Yet Affected Market Surplus

The loss of 3,000t of production from Glencore’s Democratic Republic of Congo (DRC) subsidiary Katanga Mining, which shut in October for 18 months, has meant that its long-term customer will have to look to other sources for chemical grade cobalt units once deliveries under the current contract end.
With no shortage of available supply, Glencore’s cut has to be followed by reduced production to balance the market, industry sources said.
Glencore’s copper and cobalt production cuts have not been followed by other producers. If anything the cuts appear to have reduced the urgency for other mining firms to take similar actions. Katanga deliveries to customers under contract will continue until the end of 2016, and there looks to be no shortage of available supply to replace the lost production.

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Despite a positive outlook of increased demand from the battery sector, cobalt prices have been trading much lower than previously anticipated. According to market participants, the depressed cobalt prices seen at present are unlikely to persist into next year as the market expects to recover. The major driving force next year and in the years to come is expected to be lithium-ion batteries, with car maker Tesla’s new Gigafactory forecast to push cobalt demand beyond 100,000t/yr by 2020. Tesla’s Powerwall concept seeks to move the market beyond automotive into home energy storage. Battery chemicals alone are expected to add between 5,000t/yr and 10,000t/yr of cobalt demand in the medium term.
Lithium-ion is not always the material of choice in the car making industry, but cobalt has the advantage of being used both in lithium-ion and the alternative lithium-nickel-manganese-cobalt oxide (NMC) batteries.
In Europe the government-driven switch to electric and hybrid buses and increased consumer adoption of electric and hybrid passenger cars are benefiting these markets. NMC batteries are favoured for electric buses and demand for these, together with lithium-ion, comes from electric vehicles, while in hybric cars lithium-iron-phosphate batteries are a competitor.
In China production of electric vehicles has risen 300% in the year to date, helped by the government’s new policy to reduce urban emissions. South Korea’s Samsung last month opened a new battery plant in Xi’an, Shaanxi province, to manufacture lithium ion-batteries for approximately 40,000 electric vehicles a year. To read more, Sign up for a Free Trial Argus Media Membership
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