Why Are Metal and Mining Stocks BHP Group, VALE, Wheaton Precious Metals Falling Monday?

Metal and mining stocks, including BHP Group Limited BHP, VALE S.A. VALE, Wheaton Precious Metals Corp WPM and Freeport-McMoRan, Inc FCX are trading lower Monday as prices of the cobalt hydroxide used to make chemicals for electric vehicle batteries have plunged due to higher supplies from top producer Democratic Republic of Congo. 

Also Read: EV Battery Prices Continue To Decline Over 10% In August: Report

According to Benchmark Mineral Intelligence (BMI), payables in August dropped to 46% of the cobalt metal price versus 90% in late 2021 and early 2022, when cobalt metal traded around $60,000 a metric ton. Cobalt is currently trading at around $32,000 a ton.

BMI analyst Roman Aubry expects a cobalt market surplus of 17,000 tons in 2023, finding it unlikely to see prices return to 2022 levels. Aubry expects demand to overtake supply quite substantially in 2027.

Soaring production from Indonesia, where cobalt is a byproduct of nickel, also adds to surpluses.

BMI estimates cobalt supplies from Indonesia will more than double to above 19,000 tons in 2023 from 2022, while those from the DRC will rise more than 14% to 169,000 tons or 72% of the global total at nearly 223,000 tons.

Congo supplies got a boost from the resumption of cobalt and copper shipments from China's CMOC Group Tenke Fungurume mine (TFM) in July after a one-year stoppage due to a government dispute.

The demand failed to catch up with supply partly due to weakness in sales of consumer electronics like mobile phones and laptops, which use cobalt-containing batteries, another headwind being the switch to cheaper lithium iron phosphate (LFP) batteries and away from those that use nickel, cobalt, and manganese (NCM) cathodes.

Morgan Stanley analysts see cobalt prices remaining under pressure due to supply growth and CMOC destocking headwinds posing long-term challenges to cobalt demand.

Price Actions: BHP shares traded lower by 1.37% at $55.97 on the last check Monday. VALE prices traded lower by 3.24% at $13.31. WPM shares traded lower by 1.64% at $42.59. FCX shares traded lower by 0.59% at $36.93.