New story from the Financial Times. lets see if hes right? Neil...

New story from the Financial Times. lets see if hes right?

Neil Hume, Natural Resources Editor
Since the deadly dam rupture at Vale’s Córrego de Feijão mine last month the price of iron ore has been on a tear. It has jumped as much as 20 per cent even though the wider impact is relatively small — just 52m tonnes of production has been lost from the 1.5bn-tonne export market. All of which stands in marked contrast to cobalt, one of the hottest commodities of recent years, where the price has hit a two-year low in spite of a serious interruption to supply. Glencore, which dominates the market for the battery metal, has been forced to halt sales of cobalt from its giant Katanga mine in the Democratic Republic of Congo while it works on a system to remove uranium from its ore. The project is on hold because of objections from the DRC government with the upshot that 26,000 tonnes of cobalt sales expected in 2019 have been pushed back to 2020. On top of that, Glencore has warned that plans to extend the life of its 27,000-tonne-a-year Mutanda mine — also in the DRC — have been complicated by the “uncertain political and increased cost environment” in the African country, which has just pushed through a tough new mining code. To put the contribution of these two sites in perspective, total mined cobalt production last year was about 136,000 tonnes. So what gives? After an extraordinary bull run, cobalt — which is mined alongside copper and nickel and used in the batteries that power electric vehicles and mobile phones — crashed back to earth last year. It hit a 10-year peak of more than $40 a pound in April powered by speculative interest and stockpiling by refiners. The metal then slumped into a bear market, hit hard by macroeconomic jitters and a supply surge from the DRC, which accounted for almost three-quarters of global supplies in 2018. It was trading at around $20 a pound earlier this month, according to Fastmarkets. One reason the price has remained becalmed is that China, the largest consumer, has made a big push into electric vehicles and is very well supplied after a multiyear buying spree, according to Colin Hamilton of BMO Capital Markets. Traders say there is no reason for Chinese refiners, which convert cobalt into the chemicals used in lithium-ion batteries, to buy. FT Archive Markets Insight Henry Sanderson Cobalt’s supply shock a painful warning to carmakers Moreover, analysts expect supply to outstrip demand in 2019 and beyond. Driven by the DRC, refined cobalt production rose 9 per cent last year to 114,000 tonnes, outstripping consumption, which increased 6.6 per cent to just over 111,000 tonnes, according to Darton Commodities, a cobalt trading company. Darton expects the cobalt market to remain in surplus until 2021 thanks to ample supplies from DRC, after which rising electric vehicle sales will lead to prolonged deficits. “As new mining projects approach capacity and EV demand accelerates, the market balance is expected to turn in 2022,” according to Darton’s latest cobalt market review. Until then, this small but increasingly important commodity market looks set to remain in the doldrums in spite of its potentially crippling reliance on the DRC, one of the world’s poorest and most corrupt countries.