I think that in the short-term we will see the growth of the cobalt prices driven by stable demand from electric vehicle (EV) manufacturers. However, my long-term outlook is bearish, due to the ambitious production guidance released by Katanga (Glencore) for their restarting KOV operation in the DRC. The higher prices and rising market of EV have begun to stimulate producers to provide capacity for a larger output, which in my opinion will lead to a surplus of cobalt in the market.
Current prices are at highs. I think that Co story is overheated and I expect correction in short-term and rather stable prices (after correction) in long term. Recent price growth was mainly caused by supply constraints. These constraints were due to appearing of Amnesty International's report regarding child labour in DRC's mines (~60% of Co supply). Why earlier nobody cares about this big humanitarian disaster? And why this report appeared only after Co story had begun to be a mainstream? Unfortunately, I see only one reason: on the expectations of significant demand growth, it was decided to redivide the Co market. At the moment, as we see such attractive prices, I expect African mining industry will be developed by foreign investors (particularly, Chinese) and supply growth will balance the market
I think that recent price growth was only caused by demand increasing in battery segment and I expect that this growth will continue. I don't believe that there was any significant drop of supply due to human rights issues in DRC's mines. Taking into account so attractive Co prices, I think that DRC's miners would not stop realization of their metal. And I think they have a lot of instruments to circumvent restrictions (for example, through Chinese intermediaries)
In 2016-2017 we saw significant price growth due to cobalt shortage (demand growth in battery segment with constraint supply from Africa). I expect that market will be in deficit in 2018 as well. However in 2019-2020 mine development in Africa might lead us to a surplus, price growth is likely to slow down. I think that key thing in Africa mining development is Chinese ownership of DRC copper-cobalt mines increasing (at the moment I value that approximately 25% of mines in DRC are Chinese-owned, that share might increase up to 50% due to investment in new projects). Nevertheless, after 2021, as EV story will continue and fast growth of EV demand will start, I think that we will see sustained and widening shortage of cobalt and, thus, second wave of price growth.
I expect ongoing cobalt deficit due to limited supply (downstream cobalt users have been actively buying cobalt mines or signing collaborative agreements with suppliers) and expanding demand (sales of new energy vehicles have grown steadily)