The prices of commodities such as iron ore, oil, gold, lithium and copper are notoriously hard to forecast over the short or long term.
For example, back in mid-2016, Goldman Sachs infamously slashed its coal price forecast and warned investors off coal right before its price went absolutely gangbusters for the next two years.
However, cobalt investors have some good news today if the analysts at UBS are on the money about the cobalt price direction over the next year.
According to a Reuters news report, UBS is forecasting a 60% climb for cobalt prices over the next 18 months to US$20/lb, due partly to the closure of a Glencore cobalt mine in the Democratic Republic of Congo. The article also reports that cobalt prices could move even higher by 2024–25 due to a supply deficit.
The ASX has dozens of micro- and small-cap cobalt miners and prospectors looking for a cobalt cash-in, with some of the more popular ones including Clean Teq Ltd (ASX: CLQ), Havilah Resources Limited (ASX: HAV), Cobalt Blue Holdings Ltd (ASX: COB), Jervois Mining Limited (ASX: JRV) and Australian Mines (ASX: AUZ).
Both cobalt and lithium are key ingredients in the batteries required to power electric vehicles, while cobalt is also commonly used in the batteries to power increasingly popular everyday electronic items such as laptops and iPhones.
The story is attractive on first blush, but whether any of these companies can turn rising demand into free cash flow and returns for shareholders is another story.
Still, if UBS is on the money, these stocks could enjoy a strong 2019 and 2020.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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