Glencore’s cobalt glut sparks risky new bet on battery metals

Key topics:Cobalt Holdings plans to IPO and stockpile Glencore’s excess cobalt.Cobalt prices recently hit 20-year lows, then rose after DRC export bans.Investing in cobalt remains risky due to oversupply and DRC market control..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Javier Blas.Commodity giant Glencore Plc produces lots of cobalt, the metal that goes into batteries. So much that it doesn’t know what to do with it all. So why not create a second-hand market? Enter Cobalt Holdings Plc, a company trying to raise $230 million in an initial public offering in London.The venture’s business model is simple: Raise money from investors, use the proceeds to buy about 6,000 metric tons of cobalt from Glencore, stick the metal in several warehouses and wait. Hopefully, prices will rise. Or not..The last time London-based investors bought something from Glencore – its shares, at an IPO in 2011 – it didn’t go well. The stock took 11 years to regain their original price — and did so only briefly. In just over 3,500 trading days since it went public, Glencore has closed above the original sale price just 58 times. Today the shares trade below 300 pence ($4.05) — down more than 40% from the IPO price of 530 pence.Investors may be luckier this time. The trading house will have a tiny bit of skin on the game as it’s taking a 10% stake in the new cobalt vehicle as a cornerstone investor, worth just under $25 million. Wannabe investors need to ask themselves if the commodity trader will leave any money on the table this time. Maybe; Glencore is selling the first tranche of the cobalt at a small discount to market prices. But it’s important to remember that buyers aren’t exactly flooding the commodity giant with orders for the material. .Read more:.Sasol CEO plans US chemical revival, IPO potential.More convincingly, the team behind the new venture, including Chief Executive Officer Jake Greenberg, have previously managed a similar enterprise that did well. Yellow Cake Plc, a buy-to-stockpile uranium vehicle, has more than doubled in value since its 2018 London listing. It did help that Russia invaded Ukraine, disrupting the nuclear-fuel market worldwide. But previous attempts to offer investors a play on cobalt have faltered; Toronto-listed firm Cobalt 27 was ultimately taken private by its key hedge-fund backer in 2019 after a collapse in prices.Greenberg describes his new undertaking as a “low-risk, low-cost” way for speculators to access the battery-minerals market similar to how Yellow Cake allowed investors to gain financial exposure to uranium prices. But neither term is really applicable here. Investing in cobalt is a high-risk exercise as the Democratic Republic of Congo — source of around 75% of the world’s supply — tries to manipulate the market. And Cobalt Holdings, which is domiciled in the Cayman Islands, is a relatively high-cost vehicle with significant payments going to its founders, who are set to control 5% of the company post-IPO, a stake worth more than $10 million at its intended valuation.On top, the consultancy company controlled by Greenberg that advises the investment vehicle is set to make $2 million immediately after buying the cobalt from Glencore. Further fees would follow every year linked to the size of the fund and every time it buys or sells the mineral. The marketing pitch for Cobalt Holdings is two-pronged: Cobalt prices are near rock-bottom levels, and demand for the commodity is set to increase rapidly as the world uses more batteries. While most metals experience annual demand growth of 2% to 3%, cobalt and other battery metals, such as lithium, have enjoyed consumption increases of 10% to 20% per year. From the demand side, critical minerals are the envy of the commodities industry. Supply, though, has also expanded at breakneck speeds. For many years, Glencore dominated the market. But Chinese companies soon followed it into the DRC. There, a Chinese company known today as CMOC Group Ltd. has boosted output beyond what many in the industry thought was possible in a very short timeframe..Unsurprisingly, the production shock has overwhelmed demand, prompting inventories to accumulate everywhere. Even under the most optimistic scenario, it would take at least a year to clear the surplus. More circumspect observers talk about five years or even longer. Why would it take so long to rebalance the market? Shouldn’t production respond quickly to low prices, as in a typical boom-bust commodity cycle? The problem is that cobalt isn’t your typical commodity. Almost no one digs solely for the mineral; instead, about 98% of the world’s output is a byproduct of copper and nickel mining. Hence, what matters isn’t what cobalt fetches, but rather what those two metals do. And both command high enough prices that miners have every incentive to keep digging. Thus, low prices aren’t the cure for cobalt overproduction.In February, cobalt prices reached a 20-year low, prompting the DRC government to intervene. It mandated a four-month export ban, which ends this month. It’s unclear what will follow, but officials have suggested an export quota system. For now, the measures have worked: cobalt prices have risen 50% since the ban was announced. But the restrictions haven’t resolved the underlying issue; CMOC and other Chinese miners, plus Glencore, have been busy digging for copper, with cobalt accumulating even though it couldn't be shipped. In many ways, Cobalt Holdings is coming to market too late. The rally has happened. Investing in the new vehicle is betting that the DRC won’t only succeed in keeping prices artificially high, but can inflate them even further. That’s a perilous wager — not a low-risk investment. .© 2025 Bloomberg L.P.

Glencore’s cobalt glut sparks risky new bet on battery metals

Key topics:

Related Stories