Cobalt Holdings wagers on a shift in the fortunes of the battery metal

The battery metal market is experiencing a significant shift, according to Cobalt Holdings, a company similar to Yellow Cake that offers investors a physical play on specific metals, namely uranium and cobalt. This change in fortune comes as the global demand for cobalt exceeded 200,000 metric tons for the first time in 2024, despite the market remaining over-supplied.

The over-supply in the market can be attributed to several factors. The Democratic Republic of Congo (DRC) and Indonesia have contributed to a flood of cobalt production, leading to an oversupply. China's CMOC Group significantly increased its cobalt production, more than doubling it to 114,000 tons. The output surge from CMOC Group is primarily from the TFM and KFM mines in the DRC.

However, the DRC may soon impose a strict limitation on cobalt exports. Patrick Luabeya, head of the government's strategic metals authority, has stated that any decision regarding cobalt exports will inevitably imply a strict limitation. This move is a positive sign that the DRC has recognized it is producing too much of the metal. The material produced by CMOC Group is currently stuck due to the Congo's export ban on cobalt, which expires in June.

Cobalt Holdings, in response to these developments, announced its Initial Public Offering (IPO) in London, scheduled for 2025. The company plans to raise $230 million, with the majority of the funds to be used to purchase 6,000 tons of physical cobalt from Glencore. The CEO of Cobalt Holdings, Jake Greenberg, believes the purchase from Glencore will be made at or near a low point in the cobalt cycle.

The longer-term bull thesis for cobalt hinges on whether the Congo and Indonesia can restrain their supply, and whether cobalt can maintain its position as a critical new energy input. The future of cobalt is uncertain, but with the government of the Congo taking steps to balance the market, and companies like Cobalt Holdings making strategic moves, the battery metal market is set for an interesting ride.

In related news, the latest news in the battery market is relevant to the cobalt market. The global demand for cobalt is expected to continue to grow, driven by the increasing demand for electric vehicles and energy storage systems. However, the market's balance will depend on the supply side, with the DRC and Indonesia playing crucial roles.

Meanwhile, the informal sector output of cobalt in the DRC saw a historic low last year, both in absolute and relative terms, according to Benchmark Mineral Intelligence. Artisanal miners in the DRC have given up on cobalt due to the low price and increased production from the formal sector and Indonesia.

In conclusion, the cobalt market is experiencing a significant shift, with the DRC taking steps to limit its cobalt exports, CMOC Group continuing to surge in cobalt production, and Cobalt Holdings planning an IPO to purchase physical cobalt. The future of cobalt remains uncertain, but with these developments, the battery metal market is set for an interesting journey.