Inspenet, July 8, 2023.
China is increasing cobalt reserves by taking advantage of its lower price, according to Bloomberg reports. China’s National Strategic Reserves and Food Administration has plans to procure around 2,000 tons of cobalt , according to sources familiar with the matter. Chinese refineries rely heavily on cobalt mines in the Democratic Republic of Congo, although Indonesia is fast emerging as a major producer.
Demand and price fall
After reaching an all-time high of $81,790 per metric ton in April 2022, cobalt prices have declined by almost 60%, reaching $33,140 per metric ton due to weak global demand and increased supply from Indonesia, which is now it is the second largest producer. Goldman Sachs has forecast weakness in metals used in batteries, including cobalt, lithium and nickel, during the second half of 2023, mainly due to oversupply.
“We expect a further decline in cobalt prices in the near term, as demand in the EV battery sector slows, while rising global production keeps inventories in good shape. On the other hand, demand for cobalt in the batteries of consumer electronics such as laptops and phones will also remain gloomy due to the global economic slowdown,” a market analyst at Fitch Solutions said in a recent report.
However, it is not just the cobalt market that is affected. The commodity bull run that began three years ago and drove commodity prices to multi-decade highs has finally come to an end. From oil, gas and wheat to lithium, copper and iron ore, the prices of the world’s major commodities have suffered a sharp decline across all sectors.
The reason behind the cobalt reserves
The Bloomberg Commodity Index (BCOM), the most widely used benchmark for the commodities market that tracks 23 exchange-traded physical commodity contracts and has more than $100 billion in assets, is down 12% so far this year and shows no signs of changing course. The index reached its 9-year high in May 2022 and commodity prices doubled in just two years. However, since then, BCOM has declined nearly 25%, effectively marking a bear market for commodities.
“The fall in commodity prices seems to reflect uncertainty in China, a possible recession in the US and supply problems in Europe. In fact, we may see a temporary decrease in inflation,” said Carsten Brzeski. , ING’s global head of macro, in an interview with Bloomberg.
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