The primary goal was to better define its cobalt products portfolio strategy and address possible risks ahead of completion. CRU was asked to provide assistance on the following matters:
Product mix – what cobalt products and how much? How big is the captive and third party market for different products and where is the market moving in terms of raw material requirements and preferences?
Marketability of cobalt products – where, to whom and how is the product to be sold? What are the key considerations, barriers and off-take risks for different products and specific customers?
Downstream strategy – where are the entry points for the company and are there opportunities for downstream expansion? What are the barriers to entry and risks? What are the requirements?
The research concluded that the company should focus the majority of its output on low risk, large volume markets first. Its competitive cost base and high grade product would allow it to capture share quickly while at the same time differentiating from other suppliers. Crucially, the company ought to remain vigilant about downstream opportunities that would complement its raw material business – by offering opportunities for value-added products and cost savings, reducing off-take risk and gaining access to more customers and regionally diverse markets.
CRU conducted extensive primary research into the cobalt value chain - from producers in the DRC through to end-user in China, Japan, Taiwan and Korea. Cobalt supply from artisanal sources, responsible for 10-15% of global supply, was thoroughly reviewed and the economics behind the trade clearly established and quantified.
CRU also developed a bespoke cobalt mine cost model capturing all by-product and primary cobalt production and estimated margins at each stage in the value chain. This provided a clear picture on the structure of the industry, marginal flows, likely future supply outlook and risks and aided in the development of a proprietary pricing model for cobalt intermediates and metal. CRU also carried out extensive research on the end-use sectors, with a focus on batteries, in Asia and profiled key players and material flows – highlighting entry points for material and describing the trading and operating environment at various stages. In answering these questions, CRU was able to assist the client in detailing likely supply scenarios and the company’s preferred positioning.
The company used the research and findings to guide its portfolio development, prioritise off-take with certain customers and steer its central and regional teams.
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