Analysis: China turbo-charges cobalt mine output despite price crash
07/12/2023 01:00
(Repeats DEC 6 story with no change)
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Cobalt needed for China's strategic electric vehicle
sector
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New projects in Congo and Indonesia fuelling glut
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China's CMOC lifts cobalt output by 144% in nine months
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FACTBOX on cobalt mines
By Eric Onstad
LONDON, Dec 6 (Reuters) - Chinese-owned companies are
aggressively expanding cobalt mining in Congo and Indonesia even
while prices crash, as they bid to raise market share of the
metal used in batteries for the country's electric vehicle (EV)
industry.
Chinese cobalt producers have seemed unfazed by oversupply
that has knocked prices down by more than half in the past 18
months, with some said to benefit from state support for a
sector seen as vital to China's EV industry, as well as firmer
prices of metals with which cobalt is mined, such as copper.
China's CMOC Group 603993.SS , which boosted its cobalt
output by 144% during the first three quarters of 2023, is now
on track to become the world's biggest cobalt producer,
overtaking commodity group Glencore GLEN.L .
CMOC is due to lift its market share of the global mined
cobalt market from 11% in 2022 to nearly 30% by 2025, said Jorge
Uzcategui, an analyst at consultancy Benchmark Mineral
Intelligence.
Its Kisanfu mine in Democratic Republic of Congo (DRC) is
partially owned by China's CATL 300750.SZ , the world's largest
battery maker for EVs.
The group is able to operate at low costs, likely helped by
receiving cheap financing from the Chinese government, Uzcategui
said. CMOC is listed in Hong Kong, but according to its LinkedIn
profile has "state-owned capital participation".
“Is CMOC trying to flood the cobalt market in an attempt to
control a larger share of the market and oust the marginal
producers, giving them more control over prices in the medium to
long term? That is a possibility," said Uzcategui.
When contacted for comment about the impact of weaker prices
on output, CMOC said that there were positive aspects to rising
cobalt production, but it did not respond to a question about
Uzcategui's comments.
"The growth of cobalt supply has to some extent dispelled
downstream concerns about (its) sustainability," a CMOC
spokesperson told Reuters.
"Our cobalt products are mainly sold through long-term
contracts and are not subjected to short-term market
fluctuation."
China's MMG Group 1208.HK has also pressed on with
expansion at its Kinsevere mine in Congo, while Jinchuan Group
International Resources 2362.HK is likewise expanding its DRC
cobalt output.
BOOM TO BUST
Silvery-blue cobalt was once seen as an indispensable
element of EV lithium-ion batteries, with prices soaring in May
2022 to four-year highs.
But EV sales have been slowing as inflation hits consumers
and governments cut subsidies, while batteries without the
mineral have been rising in popularity.
A combination of high prices and ethical concerns about
child miners and unsafe conditions in Congo have prompted some
battery companies to look for alternatives.
"Lithium is pretty fundamental to a lithium-ion battery...
but with cobalt, you can design it out," said Alex Holland at
consultancy IDTechEx.
Increasing nickel and cutting cobalt increases energy
density, allowing longer driving ranges in EVs, he added.
While lower cobalt prices may revive use of higher-cobalt
batteries, content of the metal in popular nickel manganese
cobalt (NMC) batteries has been declining, while lithium iron
phosphate (LFP) batteries contain none at all.
INDONESIA HELPS OFFSET DELAYS
Global refined cobalt supply is expected to climb 23% this
year, creating a surplus of 74,800 metric tons by 2024,
according to Morgan Stanley.
No. 1 producer DRC has kept miners under pressure to ramp up
output to maintain the millions of dollars it receives each year
in mining royalty and tax payments, analysts said - particularly
with an election upcoming this month.
Analysts had expected at least some major cobalt producers
to impose cutbacks, as happened recently in nickel to curb
excess supply, but only scant action has materialised.
Jervois Global JRV.AX in March suspended the final
construction of what would be the only U.S. primary cobalt mine,
while debt-laden Miner Chemaf SA is up for sale, according to a
document seen by Reuters in October, leaving two copper-cobalt
projects in Congo 85% complete.
Major producer Glencore temporarily closed its Mutanda mine
there in 2019 due to low prices and its CEO said in August it
was considering similar action again, but output so far this
year has shown no signs of cutbacks.
Glencore declined to comment on whether it planned to
suspend any cobalt operations in the future, but depleting ore
grades were likely to trim output at Mutanda, sources told
Reuters.
Nonetheless, delays and cuts have been more than offset by
new projects, including in Indonesia, which last year became the
world's second biggest producer, with many owned by Chinese
companies.
"Our view is that Indonesia is a game changer for cobalt,”
said Bedder at Project Blue.
Indonesia is expected to roughly quadruple its production of
cobalt in mixed hydroxide precipitate (MHP) by 2033 and may
expand even further if all projects go ahead, Project Blue
forecasts.
"In the next five years or so, we think they'll be
oversupply in the market. So essentially that's going to mean
prices are going to remain low for the foreseeable future," said
Thomas Matthews at CRU.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Cobalt mine expansions fuel glut, tumbling prices https://tmsnrt.rs/3FZrMan
Cobalt prices tumble as mine supply ramps up https://tmsnrt.rs/47Xtipc
Indonesian cobalt production set to soar https://tmsnrt.rs/4a274V7
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(Additional reporting by Felix Njini in Nairobi, Sonia Rolley
in Kinshasa and Siyi Liu in Beijing; Editing by Veronica Brown
and Jan Harvey)
((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO;
Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))