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Glencore’s plans trigger cobalt price rally to six-month high

Consumers are buying back into the market before cobalt gets too expensive, trader says.
The economic viability of Glencore's Mutanda mine had deteriorated because of low cobalt prices, resulting in its closure, CEO Ivan Glasenberg says. Picture: Andrey Rudakov, Bloomberg

Cobalt prices have scaled a six-month peak on expectations of shrinking supplies after top producer Glencore announced plans to shut its Mutanda mine in the Democratic Republic of Congo.

Cobalt rose to $17.5 per lb in the past week, a gain of more than 30% since early August, when commodity trader and miner Glencore said Mutanda would close from the end of this year for two years.

Glencore chief executive Ivan Glasenberg said the mine’s economic viability had deteriorated because of low cobalt prices.

“Glencore shutting the mine was the initial driver behind higher prices. Then, a lot of consumers came back to the market, wanting to buy before it became too expensive,” a Europe-based cobalt trader said.

Some consumers are looking to lock in deals for the next two years, traders said.

A byproduct of copper production, cobalt in the DRC is produced in the form of hydroxide, which is easily turned into chemicals used to make lithium-ion rechargeable batteries for electric vehicles and mobile devices.

The metal slumped to three-year lows of $13 a lb in July due to a supply glut.

“News that the Mutanda mine will be placed on care and maintenance around the end of this year is set to result in an underlying cobalt deficit of around  5 000-10 000 tonnes over the next five years,” Citi analysts said in a note.

Citi estimates cobalt demand at 126 300 tonnes next year, rising to 133 200 tonnes in 2021. It expects prices to average $38 750 a tonne and $45 000 a tonne respectively.

Traders said cobalt production cuts at Managem’s Compagnie de Tifnout Tiranimine (CTT) operation in Morocco in August and September also helped the cobalt price to recover.

Managem did not respond to requests for comment.

“It may be too early to see a roller-coaster ride in cobalt prices as tightness in raw material supply has not yet materialised,” Roskill analyst Ying Lu said.

“(However) demand for cobalt is growing, with the metal being essential in the ongoing global trend of electrification, especially for the automotive sector.”

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