LONDON, May 29 (Reuters) - The price of cobalt has

fallen so far over the last couple of years that even Congo's

artisanal miners have given up on the battery metal.

They have been swept aside by a wave of production from the

Democratic Republic of Congo's (DRC) formal sector and a

secondary flood of metal from Indonesia.

The market was over-supplied for the third consecutive year

in 2024 even though global demand exceeded 200,000 metric tons

for the first time.

Metals investor Cobalt Holdings is betting that the worst is

over.

The company is aiming to raise $230 million from an initial

public offering in London the majority of which it will use to

buy 6,000 tons of physical cobalt from Glencore ( GLCNF ).

Chief Executive Jake Greenberg believes the purchase from

Glencore ( GLCNF ), the first of several, will be "at or near a low point

in the cycle", according to the company's registration filing.

Greenberg helped launch Yellow Cake ( YLLXF ), which offers

investors a physical uranium play, and Cobalt Holdings is a

similar vehicle for punters wanting to ride the cobalt cycle.

It's likely to be a bumpy ride and the longer-term bull

thesis hinges both on whether the Congo, and to a lesser extent

Indonesia, can restrain supply and on whether cobalt can

maintain its position as a critical new energy input.

FINDING THE FLOOR

The DRC government's imposition of a four-month export ban

in February is a positive sign that the world's largest cobalt

producer has woken up to the fact it is producing too much.

Cobalt has a history of boom-and-bust pricing as

super-strong rallies such as those in 2018 and 2022 generated an

artisanal supply response.

Not this time.

Congo's informal sector saw output drop to a historic low

last year, both in absolute and relative terms, according to

analysts at Benchmark Mineral Intelligence (BMI).

Rather, it was China's CMOC Group which caused

the supply shock, more than doubling production to 114,000 tons,

above both guidance and assumed nameplate capacity at its TFM

and KFM mines in the DRC.

The output surge continues unabated. The company reported

first-quarter output of 30,414 tons, up 21% year-on-year.

That material is stuck for now as the government decides

what it will do when the export ban expires in June.

But any decision "will inevitably imply a strict limitation

of exports in whole or in part until market balance is reached

with regard to the supply and demand of cobalt", according to

Patrick Luabeya, head of the government's strategic metals

authority.

Congo's apparent readiness to address its over-production

has dispelled some of the cobalt blues, boosting the price to

$16 per pound from a 10-year low of $10.

The market is now on tenterhooks as it awaits Kinshasa's

next move.

But if the world's largest producer is prepared to limit

exports or production, the market may have found a price floor,

an elusive concept for a metal that is largely produced as a

by-product of either copper or nickel.

BATTERY WARS

Cobalt demand grew by a robust 14% year-on-year in 2024,

driven by the metal's usage in electric vehicle (EV) batteries,

according to BMI's annual market report commissioned by The

Cobalt Institute.

The bull case for the metal rests on EV battery demand

continuing to expand to the point that cobalt usage starts

outstripping production some time around the turn of the decade.

BMI expects market surpluses to shrink going forwards, even

without any production curbs in the DRC, with a structural

supply deficit emerging "from at least the early 2030s".

However, cobalt's share of the EV battery market is in flux

as Chinese EV producers pivot to battery chemistries that don't

use any cobalt at all.

This is also true of the fast-growing energy storage sector,

which is dominated by lithium-iron-phosphate (LFP) batteries.

The good news is that Western automakers are still heavily

committed to cobalt-chemistry batteries and may become more so

as China tightens export controls on LFP technologies.

But cobalt's fortunes remain in significant part dependent

on the global battle to produce ever more efficient and powerful

batteries. Some of them will contain cobalt, others will not.

STRATEGIC STOCKPILE

Cobalt Holdings is not the only entity looking to scoop up

cobalt at bargain-basement prices.

China's state stockpiler has been doing the same. BMI

estimates the National Development and Reform Commission

received around 16,600 tons of cobalt in 2024, up from 7,200

tons in 2023.

That reduced last year's supply surplus from over 50,000

tons to a still substantial 36,000 tons.

While China is well stocked, the West isn't, even though

just about every country classifies cobalt as a strategically

important metal, not just for its use in batteries but also in

the form of super-alloys for aircraft manufacturing.

Cobalt Holdings' plans to accumulate what amounts to a

Western strategic stockpile is an interesting development in the

broader competition between the West and China for access to

critical minerals.

It helps loosen China's mine-to-market grip on the cobalt

supply chain and simultaneously offers a hedge against future

disruption in a supply chain which is highly concentrated

geographically.

However, it remains to be seen how long investors will have

to wait to see the cobalt cycle once again turn from bust to

boom.

There is a lot of cobalt around right now and there still

will be even after Cobalt Holdings takes another 6,000 tons off

the market.

The opinions expressed here are those of the author, a

columnist for Reuters.

(Editing by Emelia Sithole-Matarise)