Cobalt’s Cold Shoulder

Cobalt’s Cold Shoulder

almost 5 years ago2 mins

Cobalt was the first metal to be discovered since ancient times; today, it’s used in aircraft engines, to help treat cancer, and – crucially – in lithium-ion batteries used in electric vehicle (EV) batteries. But cobalt’s currently on investors’ minds for the wrong reasons...

Rising demand for EVs sent cobalt’s price charging up in 2017 and early 2018, hitting highs not seen in a decade and prompting some audacious heists 📈 But cobalt’s been buried ever since: in the past year, its price has fallen over 60%.

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Bad things happen in threes, and cobalt’s no exception. Its price has been pummeled by an onslaught of new supply coming from a Congo mine run by Glencore, a reversal in previous Chinese stockpiling – and a short-circuit in demand for EV batteries.

The latter’s partly down to removals of government incentives to encourage EV purchases in the US, UK, and China (where slower economic growth since late 2018 has also crimped consumer spending) 😰

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Cobalt doesn’t exist in a vacuum 🦋 As well as ditching the metal itself, investors have also been ditching cobalt mining and refining firms…

Last week, Huayou Cobalt’s stock dropped 10% after China’s largest cobalt refiner reported that falling prices had reduced its quarterly profit to almost zero 💨 Refiners turn cobalt into something battery makers can use – and while a lower price means lower purchase costs, it also means a lower sale price to canny battery makers. The cost of refining cobalt doesn’t fall, however, hurting profits.

And shares of Umicore, a European maker of EV battery components, had their biggest daily decline ever after the company said late in April that it expected its annual earnings to be 10% lower than forecast thanks to weak EV demand from China. Investors, needless to say, cobolted 😎

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