March 9, 2023

Due to an expected cobalt market surplus of 5,570 mt, Liberum Capital predicts that cobalt prices will average $24.90/lb. in 2023, and $22.90/lb. in 2024. AEGIS is intrigued by these forecasts, as both are higher than the current 2023 average CME Cobalt futures price of $18.25/lb., and the $19.73/lb. approximate average for 2024 CME Cobalt futures. We also note that spot cobalt prices have already dropped 60% from the highs of mid-2022, likely due to this expected supply surplus.

AEGIS feels that battery producers should hedge future usage while the market is in surplus. The reason we feel battery producers should be proactive on hedging is that the expected supply this year will likely be short-lived. For example, Liberum predicts that the market will switch to a deficit next year, and more importantly, it could ultimately grow to 20,000 mt by 2026.

So how do you hedge cobalt? There are two products available, from the CME and the LME. However, we suggest using the CME cobalt contract, as it is the only one that has gained traction with the investor community.  For example, in 2023, the average aggregate daily trading volume has been approximately 200 contracts, up from about 113 contracts/days in all of 2022. Also, since this time last year, CME cobalt aggregate open interest has jumped nearly nine-fold and now sits at nearly 17,400 contracts. Also, there is ample open interest throughout the forward curve in mid-2024. For example, all contracts between April ’23 and June ’24 have an open interest of 700 contracts or higher. Please note that there is no options market for CME cobalt. Please contact AEGIS on how to implement strategies in this new and growing market. (3/9/2023)     

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Price Indications

Today's Charts

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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.