Market diagnosis: The global cobalt market remains in structural deficit driven by the DRC export quota system — 87,000-96,600 mt/yr, less than half of 2024 peak output. LME cash settled at $56,290/mt with Fastmarkets projecting a ~10,700 tonne deficit for 2026. The quota framework is reinforced by administrative delays limiting actual shipments to roughly one-third of allocations. No demand-crushing catalyst is on the near-term horizon, and the DRC has signalled the policy is permanent through at least end-2027.
The deficit is structural, not cyclical — driven by sovereign supply controls. Chinese smelters face feedstock gaps. Non-DRC supply (Indonesia, Australia) is too small to close the gap within 3 years. The buyer position is DEFENSIVE: maintain term coverage at current levels. The asymmetric risk is to the upside if the DRC tightens enforcement or further administrative bottlenecks compound ahead of the June 30 allocation forfeiture deadline.