High Copper Prices Drive Cobalt Oversupply, With Indonesia’s Nickel Adding Pressure
The global cobalt market faces an ongoing oversupply, largely driven by increased production from copper-cobalt mines in the Democratic Republic of the Congo (DRC). According to Fastmarkets researchers, the DRC produced 76% of the world's cobalt in 2023, a share projected to remain steady through 2024 and 2025. This oversupply is closely linked to the rise in copper production, which boosts cobalt output due to their interconnected mining processes.
Cobalt, a by-product of copper mining, is typically extracted from copper ore at a ratio of 10:1, making cobalt prices highly dependent on the copper market. High copper prices, coupled with tight concentrate supplies, have encouraged major expansions in copper mining in 2024, which has led to increased cobalt production as well. Notably, China Molybdenum Co (CMOC) saw a 78% year-on-year increase in copper production during the first nine months of 2024, which pushed their cobalt output up by 127% to 84,722 tonnes during the same period.
However, cobalt demand remains weak, and with copper production set to expand further, cobalt oversupply is expected to persist, keeping prices under pressure. Copper prices are forecast to remain robust throughout 2024 and 2025, driven by demand from the renewable energy and electric vehicle (EV) sectors. This demand continues to incentivize copper production in the DRC, leading to additional cobalt output.
A trader highlighted that cobalt's secondary role means its oversupply will likely grow. Even if cobalt remains unsold, copper producers still profit significantly due to the higher profitability of copper itself.
Indonesia's nickel production has also begun to influence the cobalt market significantly. The country's rapid expansion in mixed hydroxide precipitate (MHP) output has positioned Indonesia as the second-largest cobalt supplier globally, contributing around 10% of global cobalt production in 2024, up from 7% in 2023. Much of Indonesia's cobalt comes from Chinese-backed high-pressure acid leach (HPAL) projects that ensure a consistent supply of feedstock for battery production in China.
Despite recent weak nickel prices, Chinese investments in Indonesia's nickel-cobalt sector signal a long-term strategy to secure essential resources for battery production. Cobalt production from Indonesia's MHP is expected to grow by 17%, from 29,000 tonnes in 2024 to 34,000 tonnes in 2025. This production has shifted from cobalt sulfate to cobalt metal due to its higher profitability and easier storage. Indonesian cobalt could even enter the US market tariff-free, unlike Chinese cobalt, which faces a 25% import tariff, potentially affecting global supply dynamics.
Fastmarkets researchers project an oversupply of 25,000 tonnes of cobalt in 2024 and 21,000 tonnes in 2025. The increased production of copper and nickel is fueling this imbalance, while market uncertainties, such as macroeconomic conditions and geopolitical tensions, add complexity. Factors like a strong US dollar, weaker industrial demand in Western economies, and potential geopolitical barriers could disrupt these forecasts.
In particular, Indonesia's growth has prompted supply rationalization in other regions. Higher costs have made nickel-cobalt projects in Australia and Canada less economical amid the current market glut. As geopolitical tensions rise, challenges remain regarding the export of Indonesian cobalt to the US, especially given the influence of Chinese joint ownership in many of Indonesia's cobalt operations.
Looking ahead to 2025, the cobalt market will continue to be shaped by the interplay of copper and nickel production, alongside evolving global trade dynamics and macroeconomic factors.
