Trends in the Supply
And Demand for Cobalt
Introduction
In the last twenty-five years, there have been numerous major changes in the cobalt market.
Prior to 1978, cobalt was almost exclusively supplied from Zaire (now the DRC) and Zambia as
a by-product of copper and sold on a producer price basis. In the last five years their has been a
move to nickel based operations and in the last couple of years some operations have been
commissioned which are essentially primary cobalt operations.
In general, until the early 1990's, cobalt demand was dependent on price. Following the socalled 'Shaba' Incident in Zaire in 1978 the cobalt price rose sharply, driven by fears of supply
disruptions, which resulted in extensive efforts to substitute cobalt with alternative materials.
These efforts resulted in a massive reduction in cobalt demand such that, demand did not revert
to the levels of 1979 until the early 1990's. Thereafter, demand rose rapidly as cobalt began to
be used exclusively in specialist applications.
Production
A major change in refined cobalt production in the past twenty years has been the increase in
suppliers. In 1980, ten producers accounted for over 90% of world wide refined cobalt supply.
At the beginning of 2001 that figure was eighteen. At the same time as new producers have
entered the market, many existing producers have increased their production. In addition, the
DLA became a major supplier in 1993, when it began disposing of cobalt from the US Strategic
Stockpile and in 1991, Russia became a major exporter to the west whereas, prior to that date, it
had been a net importer of about 3,000 tpa.
Apart from the very early 1990's, when Gecamines and ZCCM began experiencing production
problems, and before other producers had increased production, these changes have resulted in a
steady increase in refined cobalt supplies since 1991 (Figure 1).
Figure 1 - Refined Cobalt Production 1980-2001
The most dramatic change has been the decline in the proportion of cobalt supplied by Zambia
and the DRC. There has also been a shift from predominantly copper-based to nickel-based
production. The increased treatment of slag, intermediates and tailings has also resulted in a
shift to primary cobalt production.
Table 1 illustrates the proportion of cobalt arising from various sources over the past twenty
years.
Another major change in supply patterns has been the trend on the part of many consumers to
use low-grade cobalt containing materials instead of primary cobalt. It is impossible to obtain an
accurate figure for refined cobalt arising from intermediate/scrap but estimates suggest in the
region of 3,000 tpa excluding that processed by the major producers and included in CDI
statistics.
Future Production - The situation at end of 2001
Existing Producers
Plans to expand cobalt production in the next two years by existing producers are shown in
Table 2.
In 2001, OMG and Chambishi Metals commissioned slag treating plants in the DRC and
Zambia respectively with a total capacity of about 9,000 tpa. The 4,000 tpa from Chambishi is
additional. The Big Hill project in the DRC will assist OMG reaching its target of 12,000 tpa.
Numerous commissioning problems, mean that Murrin Murrin is still attempting to ramp up to
capacity. Kasese and Bulong planned to increase production to 1,000 tpa by 2003. Mopani
Copper is added to the list as its Nkana refinery has a capacity of 2,500 tpa.
Although based on estimates, China's production reported to be about 3,500 tpa is projected to
increase to about 5,500 tpa in the next few years.
All these increases are projected to add about 14,000 tpa of cobalt to the market within the next
two or three years.
New Producers
Over the last decade, many lists of potential new cobalt producing projects, at various stages of
development have been drawn up. Few of these projects have materialised and of the remaining,
few are past the feasibility study stage or have secured financing. It would be ridiculous to
speculate on their future. Table 3 lists the projects considered to be the next phase of production
as they have finance available, are actually progressing or have strong backing. With the
exception of Formation Capital, all the projects are nickel based.
ARE THESE INCREASES REALISTIC?
There are a number of factors which will affect these plans:
1. The Cobalt Price.
The large reduction in cobalt demand in the last year has resulted in a decline in the cobalt price
to its lowest level since about 1983. This has probably been the major influence on the market
this year. To date, the following announcements have been made:
Kasese Cobalt - placed on care and maintenance as a result of a combination of technical
problems and cobalt prices.
· Canmine in receivership.
· Nakety/Bogota project closed following Norilsk Nickel's withdrawal.
· Doubts over the future of Konkola Copper Mines following the withdrawal of Anglo American
· OMG reducing production by 20% to 1,800 tonnes per quarter beginning the fourth quarter of
2002.
If the price of cobalt does not improve from current levels (currently US$6-7/lb), other projects
treating slag or intermediates could have difficulties.
Figure 2 (courtesy of Resource Strategies) illustrates their estimates of the cobalt price required
to treat intermediates according to the cobalt grade. The treatment cost will also be dependent
on the processing route, e.g. pyrometallurgical or hydrometallurgical.
Figure 2 - Estimate of Cobalt Price Required to Treat
Intermediate According to Cobalt Grade
2. Technical problems
The three Australian first generation high-pressure acid leach (HPAL) operations are
experiencing technical difficulties and are still attempting to ramp up to full capacity. The
difficulties have caused Murrin Murrin and Bulong major financial problems. The Cawse
project has now been acquired by OMG. A question mark still hangs over at least the first two
operators.
BHP Billiton is awaiting a study assessing the operational experiences of the four existing
nickel-cobalt laterite plants using acid leach technology. It is therefore unlikely any decision on
whether to proceed with the Ravensthorpe project will be made before the end of 2003.
Murrin Murrin are still beset by technical difficulties and their third quarter 2002 production at
475 tonnes was down on that of the second quarter.
3. Availability of Feed
Availability of cobalt containing concentrates will become a problem in Zambia by 2004 as a
result of the decline in ore from Nchanga Open Pit. This could pose a problem for Chambishi
Metals and Mopani Copper already affected by the lack of concentrates from the RAMC
operation. Some of the planned increases depend on receiving feed material from the
Democratic Republic of Congo (DRC). At the current time, probably about 10,000 tpa of cobalt
containing feed materials are coming out of the DRC. This business has been a good source of
revenue for the DRC but may not remain so at the current cobalt prices.
Planned production increases in China will largely depend on the acquisition of feed material as
China is known to have few domestic sources of cobalt containing ores. Unless prices increase,
availability of feed could be a problem.
4. Cobalt production as by-products of nickel or copper
The fact that cobalt is mainly a by-product means that production is reliant on either nickel or
copper production. With the exception of Formation Capital's operation, literally all scheduled
additional copper production to 2010 will be from non cobalt-bearing ores.
Now that a peace accord has been agreed in the DRC it may be possible for some of the
strategies developed by Gécamines, outlined at the CDI recent conference in Paris and Cobalt
News 02/4, to be implemented. However, it is unlikely that significant improvements in
production will be seen in the short-term.
The greatest possibility for new cobalt production in the DRC appears to be from the American
Mineral Fields (AMF) Kolwezi Tailing Project. However, as it is basically a primary cobalt
production process, it relies on the cobalt price. The recent withdrawal of Anglo American from
the project must cast doubts over it proceeding in the near future.
It has been estimated that over the next eight years, an extra 350,000 tpa of nickel will be
required to meet demand. Of this about 85,000 tpa is projected to enter the market by 2005. A
glance at the planned projects shows that the Murrin Murrin I, Tocantins and Sumimoto are the
only ones likely to bring additional cobalt into the market before 2005 as these are already
proceeding.
Little production from new nickel producers will enter the market before 2005, based on the
assumption that construction of a refinery takes about two years and it takes a further two years
to ramp up to 85-90% capacity.
On this assumption, the current potentially most promising projects, namely Goro Goro,
Ravensthorpe and Murrin Murrin II, will not be commissioned until at least 2004/5, nor ramp up
to capacity until 2006/7, even if a decision to proceed with the latter two projects is made this
year. Formation Capital could commence production in 2003 as they plan to buy feed for their
refinery, pending deliveries of concentrate from their mining operations in Idaho.
An assessment of these new nickel projects shows that once at capacity they will produce a total
of about 150,000 tpa of nickel. This will not be adequate to meet projected nickel demand to
2010. We must therefore, assume that nickel production will increase at least in line with
projected demand. The increase over and above that from projects listed in Table 3 amounts to
about 110,000 tpa.
Assuming all this nickel is produced from cobalt-containing ores (which may not be the case),
cobalt available as a by-product from undefined new nickel operations would total about 6,500
tpa. None of this would begin to enter the market place until at least 2007.
DLA SALES
At the end of 2001, DLA stocks stood at about 7,518 tonnes. Continued sales will obviously
impact the cobalt market in the short-term but if concluded at the level approved in the annual
plan, the stocks will last for less than three years. The termination of these sales in say, 2006
will remove 2,700 tpa from the supply chain.
Supply Summary
It is impossible to take into consideration all variables as, once demand recovers and prices
increase, many of these constraints on production will fall away. However, at current price
levels, it is fair to say that production will not increase as rapidly as forecast last year due to
financial considerations.
Continued low prices will also reduce the opportunities of treating/converting low-grade
intermediates and many processors will revert to using refined cobalt. This alone will have a
firming effect on the cobalt price. Without doubt the move towards nickel-based production will
continue at the expense of copper and primary cobalt-based operations in view of the projected
increased demand for nickel in the next ten years.
Regardless of all the uncertainties, the potential for increases in supply exists at a time when
demand is slack. However, some disruption in supplies is possible in the short-term which could
result in temporary shortages.
Demand
The market conditions over the last year make it impossible to predict overall worldwide
demand in the foreseeable future. In the last decade, demand has grown faster than the growth in
worldwide GDP. Furthermore, between 1992 and 2001, demand grew at above average rates of
industrial growth, mainly as a result of the growth in portable battery applications. However,
reduced demand for mobile phones, portable PCs and superalloys for aero engines in the latter
part of 2001 changed all this. Worldwide apparent refined cobalt demand calculated from
import/export data is illustrated in Figure 3.
Figure 3 - Refined Cobalt Demand 1992-2001
The CDI estimates that apparent global refined cobalt demand in 2001 was approximately 6%
down on 2000 to 36,150 tonnes. However, the Institute figures do not include cobalt sulphate
and so are probably on the low side to the tune of a few thousand tonnes.
Other analysts estimate about a 4% reduction in demand to about 37,500 tonnes in 2001.
Furthermore, most analysts believe demand in 2002 has declined by anything up to 20% as
compared to 2001.
In spite of this reduction, cobalt remains a specialist metal used in highly specialised
applications where substitution is difficult and demand is no longer dependent on the cobalt
price per se. This fact was evident in 1996 when cobalt demand was rising rapidly at a time
when the price was nearly US$30.00/lb. This is illustrated by Figures 3 and 4 which show the
growth in refined cobalt demand between 1992 and 2001 and the price variation over that
period. You will note that in 1996 when the price was over US$30.00/lb, demand was
increasing rapidly. In my opinion, the prospects for cobalt demand are very positive given its
unique properties.
Opportunities for growth in demand exist in a number of enduse applications. Although hit by
recession, the use of cobalt in rechargeable batteries and superalloys must still be considered
major applications. In fact, reports suggest that demand in rechargeable batteries is increasing
quite strongly once again.
Latest reports suggest that cobalt catalysts used for gas to liquid (GTL) technology could boost
cobalt demand by several thousand tonnes per annum in the medium to long-term. However,
this increase could partially be offset by a reduction in the use of CoMoX catalysts used in
treating crude oil.
In the short-term, any increase in demand will be dependent on a recovery of the world
economies and the question must be when will demand return to the level of 40,000 tonnes seen
in 2000.
The low cobalt prices seen in 2002 resulted in small reductions in cobalt production by midyear. However, the declining price to a low of US$ 6.20/lb. in October resulted in
announcements of more significant cutbacks. These changes are unlikely to influence the
market dramatically for several months but it is interesting to note that by early November, the
cobalt price had risen by about US$ 0.50/lb. over the low levels seen in October.
Calculations based on import/export statistics indicate that apparent refined cobalt demand in
the first half of calendar year 2002 was 18,619 tonnes (Table 4). This total is well above the
half-year figure for 2001 and results mainly from increased demand in Asia (Japan) indicating
improvements in the demand for rechargeable batteries. Of course, it is not known whether all
this cobalt has been used or has been taken into stocks.
This article is an update of the paper presented by Michael Hawkins at the Ryan's Notes
conference in October 2002. Mr. Hawkins is the General Manager of the Cobalt Development
Institute based in the UK.