Cobalt is a byproduct of copper mining © Photo by OLIVIA RONDONUWU/AFP via Getty Images
Cobalt is a byproduct of copper mining © Photo by OLIVIA RONDONUWU/AFP via Getty Images

Plummeting cobalt prices shows ‘disconnect between supply chain planners and buyers’

5 April 2023

The cost of cobalt has plummeted from record highs, in a reversal that demonstrates division of supply chain planners and direct material sourcers.

The price of cobalt, a mineral largely used in electronics and batteries, has collapsed from $82,000 per tonne in February 2022 to $35,000 at the end of January this year, according to supply chain data provider LevaData. 

This figure is the lowest prices have reached since 2019, when cobalt was $26,000 a tonne, as the supply of cobalt has increased while demand has fallen due to decreasing sales of electronic goods following the pandemic.

LevaData CEO, Keith Hartley, told Supply Management cobalt prices are “cratering”, and will stay low for the foreseeable future.

“The supply of cobalt is so abundant, you’re seeing the market crater,” he said. “The supply side curve has spiked, and it's staying high. This is good for supply chain availability, it’s good for consumers and it’s good for companies, who can buy cheaper, deliver cheaper finished goods and potentially make more profit. 

“There will be some rebalancing of other parts, but this portends very good news for the next 24 months in consumer electronics, EVs, and photovoltaic batteries.”

He said buyers are under “intense pressure”, creating a disconnect between supply chain planners and buyers.

Hartley said: “One thing I’ve seen for manufacturers recently is this abyss between the supply chain planning function and direct material sourcing function. Planners try to predict how much of a particular thing they’re going to build, and then they turn to the buyers and say, ‘make sure we have enough cobalt and other ingredients to manufacture all this stuff’.

“The direct material sourcer is under intense pressure to deliver cost savings, to manage suppliers, to satiate the demands of the supply chain planner. Meanwhile in well-run, high efficiency manufacturing companies, these departments actually collaborate.”

Cobalt is a byproduct of nickel and copper mining–both of which are in high demand due to their extensive usage in EVs and semiconductors. Hartley said this kept cobalt production economically viable, as the other commodities are so valuable.

“So long as one or both of those commodities remains pricey, the world is going to be flooded with cobalt. The price could drop to pennies, and the market would continue to be flooded. You’re going to see cobalt go to an all-time low.”

Chief data officer at commodity analyst Benchmark Mineral Intelligence, Caspar Rawles, told SM he didn’t expect prices to start going back up until at least 2026. However, he warned buyers cannot stockpile the commodity due to its short shelf life. 

Instead, he advised buyers to renegotiate with their suppliers for longer term supply deals to take advantage of the low prices.

“If you store it for too long, it ‘cakes’, and you have to break it up, which increases handling and therefore costs. It’s not something you can buy now and stockpile for the next three years. Don’t buy the material outright, try to negotiate favourable terms–producers are likely to have some inventories they want to get off their balance sheets.”

Rawles added the drop in prices–around 50% of what cobalt cost during its peak in February of last year– has been further fuelled by manufacturers in China moving to different forms of EV batteries which require less volumes of cobalt, or none at all. 

Microsoft previously called for an industry coalition on ethical cobalt sourcing, as a third of supplies from the world’s biggest producer, the Democratic Republic of Congo, are associated with labour abuses and dangerous working conditions.

☛ Want to stay up to date with the news? Sign up to our daily bulletin.

CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates