How will Glencore's lower output impact cobalt oversupply?

News Analysis

12

Feb

2024

How will Glencore's lower output impact cobalt oversupply?

Glencore reduced its cobalt guidance for 2024, following lower cobalt output from its Mutanda, Katanga and Murrin Murrin operations.

Increased production from CMOC’s Tenke mixed ore expansion and Kisanfu project has led to the Chinese producer becoming the world’s largest producer of cobalt feedstock. Both projects were successfully put into production in H1 2023, increasing the company’s y-o-y production in the DRC by 51% Cu and 174% Co.

Reports suggest that CMOC produced 55.5kt of cobalt (contained in hydroxide) in 2023, moving ahead of Glencore, whose Mutanda mine has been operating well below capacity owing to prevalent market conditions.

Last week, Glencore reported that it produced 38.8kt cobalt from its Mutanda and Katanga operations in 2023, down 3% from its 2022 production and below its October investor guidance of 42kt. Additionally, the company saw a decline in cobalt production at its Murrin Murrin operation in Australia, down by 30% y-o-y due to planned maintenance.

Depleting ore grades and feed plan adjustments at Mutanda were given as reasons behind its reduced output but market conditions will have also played a large part and Glencore has likely built up considerable inventory in an oversupplied market.

In its latest annual report, Glencore reduced its cobalt guidance for 2024 to 35-40kt. Meanwhile, CMOC expects to reach full capacity, which should see cobalt output exceed 2023 levels.

Over the past decade, Glencore has taken both Katanga and Mutanda offline to make improvements, while also helping rebalance the market. In both cases, there was a direct impact on market sentiment and market balance.

The market is now much different given the excessive inventories overhanging the market, the large and increasing number of DRC operations and projects targeting copper (and producing more cobalt despite low prices), and the additional units coming from Indonesian HPAL.

Lower guidance from Glencore is notable but won’t move the dial much. If Glencore were to reduce output further or put an operation on C&M – it would surely affect sentiment – but market balance is now more challenging to impact for the commodity giant. 


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