During Benchmark’s most recent cobalt webinar, Glencore made the first public confirmation outlining more detailed plans for the restart of its DRC-based Mutanda Mining copper-cobalt operation following a period of care and maintenance. The Benchmark webinar was part of the Cobalt Institute Conference on 19 May 2021.
Glencore, one of the world’s leading producers of cobalt, produces cobalt mainly as a by-product of copper mining in the Democratic Republic of Congo (DRC), but also as a by-product of nickel mining in Australia and Canada. Mutanda is a large-scale copper and cobalt operation in Katanga province DRC, producing cobalt hydroxide and copper cathodes.
The plan to shutter the operation was taken in August 2019 following an extended period of low prices. At the time cobalt hydroxide—the product produced by the Mutanda operation—was trading at an average of $20,000/tonne (CIF Asia) as assessed by Benchmark. Following the August 2019 announcement, production at the mine ceased in December 2019 with the operation producing 25,100 tonnes of cobalt in that year.
Since then, following favorable EV policies put in place by governments globally as part of the COVID-19 pandemic recovery, the industry has seen rapidly increasing demand for the battery mineral under the backdrop of surging EV sales. Cobalt prices began their recovery in late 2020 with cobalt hydroxide (CIF Asia) currently up by 125.1% versus August 2019 in Benchmark’s most recent April Cobalt Price Assessment, averaging $44,025/tonne for the month.
This combination of rising prices and tightening supply due to strong demand will likely have been the key factors in Glencore’s decision to bring Mutanda out of care and maintenance, Benchmark said.
Ash Lazenby, Cobalt Trader at Glencore officially confirmed the company expected the operation to begin production in 2022 and as things stand the current production plan will see volumes rising to approximately 20,000 tonnes of cobalt by 2025, highlighting a gradual but steady ramp as market demand increases.
The production plan is in line with Benchmark’s most recent cobalt forecast which anticipated production to reach 19,000 tonnes by 2025 following restart in 2022.
Benchmark says that the restart of the operation is fundamental to the cobalt market being able to supply the volumes needed by the battery industry to the mid-2020s. Even with the Mutanda operation back online, the market is expected to experience stock drawdowns and marginal deficits from 2023 onwards.
In Benchmark’s opinion, the outlined production plan is unlikely to see oversupply in the market, with much of the material likely destined to be locked up in long-term contracts with key consumers looking to secure supply.
Benchmark notes that the lithium-ion battery supply chain is undergoing a fundamental shift as previously theoretical forecasted EV consumption translates to real demand and as global automakers start to sell larger proportions of their fleets as electric vehicles.
The battery supply chain continues to evolve via changing cathode technology and increasing commitments from producers to help the supply chain meet the increasing demand from consumers.