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Meet Hedge Funds’ New Favorite Metal: Cobalt

Meet Hedge Funds’ New Favorite Metal: Cobalt

Estimated reading time: 3 minutes

Cobalt has become a literal hot commodity when electric vehicles arrived on the scene, as the precious metal is found in EV batteries. And even though prices recently dropped, some investors are signaling optimism.

Bloomberg reports hedge funds have been buying physical cobalt (rather than financial contracts based on the metal).

Why Cobalt?

So what makes cobalt so special?  The metal helps lithium-ion batteries, such as the ones in an EV or smartphones, store energy for longer. 

However, after hitting a recent high in 2022, the price of cobalt tumbled in the past couple of years, dropping due to a supply glut that was partly fueled by slowing EV sales. 

Now, certain investors may be taking advantage of lower prices. Despite hiccups in the EV market, a push for electrification to replace outright fossil fuel use is sweeping advanced economies.

Global Implications

There’s another reason interest in cobalt may be growing: national security.

China has been stockpiling the rare metal amid crashing prices, according to a Reuters report. At a May conference, U.S. State Department official Jose Fernandez accused a Chinese mining company of using “predatory pricing” tactics to keep cobalt prices low. The low prices have, in turn, challenged Western efforts to develop refining infrastructure and make a dent in China’s market share. 

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