How Supply Shocks Reshaped the Cobalt Market in 2025: From Glut to Deficit

Cobalt entered 2025 drowning in oversupply, but a single policy decision from the Democratic Republic of Congo transformed the entire market landscape. By year-end, prices had more than doubled—a reversal driven entirely by the DRC’s control over global cobalt supply.

The Supply Crisis That Changed Everything

The cobalt market began 2025 in a dire state. After five years of production growth that more than doubled global mine output, the sector faced a stubborn glut. Prices hit nine-year lows of US$24,343 per metric ton in January, as supply vastly outpaced demand from electric vehicles and battery manufacturers. The market seemed stuck in a low-price equilibrium with no obvious catalyst for recovery.

Then, in late February, the DRC imposed a four-month suspension on cobalt hydroxide exports. The timing proved decisive. As the world’s largest cobalt producer supplying roughly three-quarters of global output, the DRC’s move instantly shifted market psychology from surplus to scarcity. By end-March, cobalt had climbed above US$34,000—a 40 percent gain in just two months—marking the sector’s first meaningful recovery in nearly two years.

Understanding Cobalt Uses and Market Rebalancing

Cobalt’s critical role across multiple industries underpins its strategic value. The metal is essential in lithium-ion batteries used in electric vehicles, energy storage systems, and portable electronics. Beyond batteries, cobalt finds applications in aerospace alloys, high-strength steels, catalysts for petroleum refining, and pigments. This broad industrial relevance explains why cobalt prices directly impact EV manufacturing costs and supply chain dynamics.

As DRC supplies tightened, Chinese refiners drew on existing stockpiles rather than face uncertain new shipments. The market attention shifted toward Indonesia, the world’s second-largest cobalt producer with roughly 10 percent of global supply. Indonesian cobalt is primarily a byproduct of its laterite nickel mining, extracted through high-pressure acid leaching (HPAL) plants that generate mixed hydroxide precipitate (MHP)—an intermediate material rich in both nickel and cobalt.

This Indonesian supply model offered a potential escape valve. With HPAL projects targeting up to 500,000 tons of MHP annually, Indonesia could theoretically produce 50,000 tons of cobalt. For Chinese refiners seeking alternatives to constrained DRC hydroxide, Indonesian MHP presented a lower-cost substitute. Yet by mid-year, it became clear that even ramped Indonesian production would prove insufficient to offset DRC reductions.

The Fragile Mid-Year Balance

Through Q2 and Q3, cobalt prices stabilized in a range of US$33,000 to US$37,000 per metric ton. Standard-grade cobalt metal traded near US$15-16 per pound, while cobalt sulfate posted even sharper gains. The DRC extended its export restrictions through September, signaling that supply constraints would persist far longer than markets initially expected.

Chinese import data validated this tightening. Cobalt hydroxide inflows had plummeted, and analysts projected that refinery feedstock would remain constrained well into 2026. Market participants increasingly viewed the DRC’s actions not as a temporary correction but as a structural shift—the definitive end of the two-year glut that had depressed prices.

Prices reflected this realization. Sulphate prices rose 266 percent year-to-date, hydroxide climbed 328 percent, and metal prices gained 130 percent by year-end. This wasn’t a modest recovery—it was a complete market regime change.

The Quota System Replaces the Ban

In mid-October, the DRC lifted its full export ban but replaced it with something potentially more restrictive: a rigid quota system. Annual DRC exports would be capped at approximately 96,600 metric tons—roughly half of 2024 levels—with just 18,125 metric tons scheduled for Q4 2025. This structural tightening added another leg to the bull case.

Prices surged above US$47,000 by late October, levels unseen since early 2023. Major producers like CMOC Group received significant allocations that supported production planning, yet inventories outside the DRC remained acutely tight. The quota system provided market clarity, but that clarity painted a picture of sustained supply pressure.

Analysts warned that persistently elevated prices could trigger demand destruction. EV manufacturers increasingly explore low-cobalt or cobalt-free battery chemistries where technically feasible—a response that, if adopted widely, could permanently reduce cobalt demand. This dynamic adds a critical feedback loop: tighter supplies and higher prices may ultimately shrink the market they initially seemed to support.

Looking Ahead: Deficit Becomes the New Normal

The 2026 cobalt outlook hinges on one key assumption: that DRC quotas remain fixed or tighten further. Fastmarkets projects a structural deficit of approximately 10,700 metric tons against estimated demand of 292,300 metric tons. This supply-demand gap, combined with drawdowns of global stocks, sets the stage for sustained price support.

Forecasts suggest cobalt could average near US$55,000 in 2026 as quota-based constraints supplant 2025’s outright ban. Indonesian production will continue climbing, but most analysts agree it remains too small to offset DRC constraints. The result: 2026 shapes up as the first sustained deficit environment in the cobalt market in years.

Yet risks exist on both sides. If the DRC revises quotas upward or faces pressure from competing producers, prices could moderate. Conversely, if ex-DRC stocks deplete faster than expected and Indonesian production disappoints, cobalt could face acute shortages by year-end—potentially destroying demand faster than anticipated.

After years of oversupply that crushed prices and squeezed margins, the cobalt market has completed a remarkable transformation. Supply-side policy, not demand growth, drove this reset. And as long as that policy holds, elevated prices—and structural scarcity—appear set to define the cobalt market throughout 2026.