What’s Behind The Cobalt Price Crash? What’s more, there was a...

What’s Behind The Cobalt Price Crash?

What’s more, there was a hoarding element to cobalt’s rise to prominence. Benchmark Minerals’ cobalt expert Caspar Rawles explains, as quoted by Edward Niedermeyer in a story for The Drive, “The Chinese were also buying more than they needed because they were stockpiling it and it was going up in value every month so they were making paper profits... which ended up being part of their undoing in 2018."

Even so, the rout now seems to be over. Prices have bottomed out and analysts expect them to start climbing up again as demand remains strong. That’s the good thing—or bad thing, depending on perspective—about fundamentals. If these are strong, any price crash would be a temporary headache. With weak fundamentals, we get the new normal in oil prices.

Yet cobalt has strong fundamentals: demand will remain robust as the EV industry gathers pace, albeit more slowly than initially expected. Government regulations, notably in China but also in other countries, will serve as a major boost for electric car adoption and whatever boosts EVs will boost battery metals.

The cobalt market is already self-regulating. Artisanal mining in Congo has declined along with prices, so there is less supply coming into the market. At the same time, carmakers are pushing ahead with their ambitious EV plans.

And;

German automakers to invest €58 billion in electric & autonomous cars

German manufacturers will make a massive investment over the next three years in electric cars and automated driving, as well as trebling the number of electric models, the head of the country’s car industry association has said.
“We will invest over €40 billion ($45.5 billion) in electric mobility during the next three years, and another €18 billion ($20.5 billion) will be invested in digitization and connected and automated driving,” VDA President Bernhard Mattes said, as cited by Reuters on Saturday, several days before the Geneva Motor Show.

Europe needs to boost electric mobility because without it, goals for the reduction of carbon dioxide emissions in the EU cannot be achieved by 2030, according to Mattes. For this purpose, the appropriate regulatory conditions must be met. Massive expansion of the charging infrastructure is also required, along with more offerings for e-vehicle buyers.

Two key takeaways;

1. From the perspective of oil, cobalt fundamentals still strong and market has bottomed out given storage of cobalt now beginning to be exhausted, buyers need to buy again (demand increases) and supply is decreasing, (therefore prices should lift)
2. Not only are the car makers investing more and more in EVs, they have to in order to meet regulations