A research report from Orient Securities Company Limited maintains a positive outlook on the cobalt industry, citing 2025 as a pivotal year for policy changes. The implementation of a quota system in the Democratic Republic of Congo (DRC) has reversed previous market expectations of cobalt oversupply and persistently low prices. Due to strict administrative controls on production in key regions, the global cobalt market is expected to continue shifting from temporary surplus to absolute shortage starting in 2025, with supply-demand conditions tightening further in 2026. This year is anticipated to see sustained high commodity prices, potentially reaching new peaks. Key points from the report are as follows:
Supply-side constraints under the quota system are driving a transition from surplus to deficit in the global cobalt market. The DRC, which accounts for 76% of global cobalt production, has set an annual export quota of 96,600 metric tons of metal content for 2026–2027, representing a 55% reduction compared to 2024 supply levels. Limited increases in cobalt output from nickel laterite projects in Indonesia and weak recovery in artisanal mining further constrain global cobalt supply elasticity. Factoring in the quotas, the report estimates structural cobalt deficits of 91,000 and 112,000 metric tons in 2026 and 2027, respectively, with the shortage exceeding 20% of demand. Institutionalized supply restrictions are expected to usher in a prolonged period of tight market conditions.
On the demand side, battery applications continue to lead growth, with solid-state batteries offering long-term expansion potential. Batteries account for 73% of global cobalt demand, with power batteries (43%) serving as the primary growth driver. Cobalt demand from the global new energy vehicle sector increased by 19% year-on-year in 2024. As the consumer electronics industry recovers, cobalt demand reached 70,000 metric tons in 2024 and is projected to grow at a compound annual growth rate of around 5% over the next three years. In the long term, solid-state battery technology's compatibility with ternary cathode materials, combined with high overseas adoption rates of ternary batteries, is expected to support sustained medium- to long-term cobalt demand growth. Global cobalt demand is forecast to rise from 189,000 metric tons in 2022 to 325,000 metric tons in 2028, maintaining a relatively high growth rate.
A restructuring of pricing mechanisms is expected to keep cobalt prices elevated over the long term, benefiting leading companies significantly. Industry pricing logic has shifted from being determined by high-cost incremental supply and low-cost market clearance to being driven by policy-induced supply gaps and rising supply security premiums. Companies such as China Molybdenum Co., Ltd. (with a 40% global market share) and Huayou Cobalt, which possess resource advantages and integrated capabilities, along with leading firms with mineral assets in Indonesia, are well-positioned to leverage scale flexibility and profit certainty during the cobalt price upcycle, allowing them to fully capture industry benefits.
In terms of investment recommendations, cobalt raw material prices are expected to remain high through early Q2 2026 due to supply shortages caused by extended shipping lead times. Over the longer term, the DRC's quota system will influence global cobalt pricing power, meaning price fluctuations will be more affected by geopolitical dynamics than by simple supply-demand balances. Relevant companies include Huayou Cobalt (603799.SH, not rated), China Molybdenum Co., Ltd. (603993.SH, not rated), Tengyuan Cobalt (301219.SZ, not rated), and GEM Co., Ltd. (002340.SZ, not rated).
Risks to the outlook include weaker-than-expected implementation of DRC quota policies, slower growth in global new energy vehicle adoption, market share erosion of ternary battery pathways by cobalt-free and lithium iron phosphate batteries, and potential deviations from forecasts if underlying assumptions change.