Not even a growing stockpile of cobalt in a Congo warehouse amounting to around 6.2% of global production has been able to turn around recent price declines in the blue metal, according to data from S&P Global Market Intelligence.

Cobalt prices have fallen 34.5% to $33,755 per tonne on March 13from $51,514/t on Dec. 30, 2022.

The market has been swamped by new capacity coming online alongside a decline in demand due to reduced purchases of electric vehicles in China so far in 2023, analysts and industry participants told S&P Global Commodity Insights. Analysts anticipate a rebound in demand in the second half of 2023, but shifts away from cobalt in battery chemistries could hold down prices in the medium term.

China's CMOC Group Ltd., the majority owner of the Tenke Fungurume mine in Congo, stockpiled more than 12,500 tons of cobalt due to an export ban, according to a report by Bloomberg. Tenke Fungurume accounts for about 11% of global production, according to Market Intelligence data, but despite the withheld supply, prices continued to drop.

"If the export ban is lifted, it may have a negative effect on market sentiment and hydroxide prices, although IXM SA, who markets the cobalt hydroxide on behalf of CMOC, is likely to manage the sale of this stock in a disciplined manner in order not to flood the market," Andries Gerbens, director and cobalt specialist at Darton Commodities Ltd., told Commodity Insights.

CMOC has reportedly been stockpiling all of the cobalt and copper produced at Tenke Fungurume, in which it holds an 80% stake, since mid-July due to the export ban, which was put in place by a court-ordered administrator. Congolese state-owned miner Gécamines SA, which owns the other 20% of the mine, is reportedly seeking billions more in royalties and interest.

CMOC and Gecamines did not reply to requests for comment.

The cobalt market is currently bloated with supply amid weaker electric vehicle demand from China, as consumers in the world's largest EV market adjust to the removal of federal subsidies, Alice Yu, a senior analyst with Commodity Insights, said in a February report.

"We expect a subdued cobalt metal price until at least the second half, when more noticeable demand improvements occur as [plug-in electric vehicle] sales normalize and the Chinese economic recovery is well underway," Yu said in the report.

However, even a bounce back in EV sales in China may not see prices recover completely in the medium term, as EV producers shift to battery chemistries that use little to no cobalt, said Lakshya Gupta, senior market analyst at commodities research firm SFA (Oxford).

"Now looking forward, there are further risks to the demand projections. We're seeing more and more [lithium-iron-phosphate] cathode announcements being made in both Europe and the U.S.," Gupta said.And although chemistries that contain cobalt, such as nickel-manganese-cobalt and nickel-cobalt-aluminum oxides, are "still very much favored" in the U.S. and Europe, the "trend over about the last decade" has been to lower cobalt content by using higher amounts of nickel, according to Gupta.

Prices will also face headwinds amid increasing supply.Global cobalt supply increased by 19.8% to 203,000 tonnes in 2022 and is expected to jump 32.1% in 2023, according to data and forecasts from Commodity Insights.

Glencore PLC increased its cobalt production this year in Congo after restarting operations at its Mutanda project in late 2021. In Indonesia, Chinese companies such as Tsingshan Holding Group Co. Ltd. are investing heavily in high-pressure acid leaching plants which produce cobalt as a byproduct, according to a report from S&P Global Ratings.

"It's kind of been a double whammy for cobalt [prices]," Gupta said.

A timeline for a resolution to the dispute between CMOC and Gecamines remains unclear, despite the involvement of the Congolese government.

"There is lots of cobalt hydroxide overhanging the market. It will take a long time for this [supply] to be consumed," said Jack Bedder, founder and director of market research and analysis firm Project Blue. " It's rumored that CMOC and the government are close to a resolution, but time will tell!"

Upcoming elections in Congo are dampening hopes of a short-term resolution and increasing concerns that CMOC may declare force majeure on its metal deliveries, Gerbens said.

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