While many industrial commodities fell victim to geopolitical and macroeconomic woes in 2018, Eurasian Resources Group (ERG) CEO Benedikt Sobotka expects to see a strong upside for cobalt and copper this year as underlying demand rallies.

With some additional volatility expected ahead, the severe underinvestment in mining projects is set to drive up prices, he said in a release issued on Friday.

As the electric vehicle (EV) market takes off this year, new models and their features, their affordability, and the availability of charging infrastructure will be key to the adoption of more EVs.

According to LMC Automotive, there will be a swath of new energy vehicle (NEV) models launched in 2019, globally – including 51 new battery EV models and 92 new plug-in hybrid EV models.

NEVs, which drive the majority of cobalt demand growth through lithium-ion battery demand, are set to see production growth of almost 40% this year, with more than 2.5-million vehicles to be produced this year.

Cobalt had a rollercoaster year in 2018, starting at $35/lb, peaking at $43.70/lb in April, and ending the year at $26.50/lb.

“Prices exhibited the strongest volatility since 2008. Many factors combined to generate this volatility – investor involvement remained strong; new EV regulations in China meant that processors worked off existing inventory without restocking for a longer period than in previous years; and a surge in artisanal supply from the Democratic Republic of Congo, combined with expanding output at some major industrial sites, put a temporary end to the upward price trajectory,” commented Sobotka.

He expects the cobalt market to remain volatile this year but that prices will move higher as a result of a combination of restocking, improved investor sentiment, supply disruptions and a strong underlying demand for EVs.

Meanwhile, Sobotka noted that the recent 17% year-on-year drop in copper prices was not justified by the red metal’s robust fundamentals.

“Visible exchange stocks finished 2018 at the lowest level in almost four years, while copper cathode premiums in all major regions of consumption reached multiyear highs in the second half of the year.”

This year, ERG expects a strong recovery in prices as investors’ attention turns to a forecast 300 000 t refined market deficit for 2019.

Healthy demand, supported further by the recently unveiled economic stimulus measures in China, looks set to outpace sluggish supply growth, hampered by weak mine output, smelter disruptions and distortions to global scrap flows, said Sobotka.

In the longer term, ERG remains positive about the prospects for the copper market.

“Severe underinvestment in mining projects in recent years will lead to protracted deficits, while copper demand for EVs, renewable energy and China’s Belt and Road Initiative offer very strong upside,” he noted.