The National Food & Strategic Reserves Administration, which overlooks the SRB, may purchase more than 5,000 tonnes of cobalt metal with delivery over a six-month period, sources said. The NFSRA did not reply to a request for comment at the time of publication.
The news raised trade sentiment and gave an incentive for price rises across the cobalt complex on Wednesday.
The rumored tender would come after the price of cobalt metal hit a four-year low in June. It was down by almost 52% year-on-year following a macro-economic downturn in electric vehicle demand and a rapid ramp-up in supply availability.
“The SRB stockpiling talk has elevated market sentiment. Because the cobalt metal market is already tight, [such a] large volume [going into] stockpiling will make it even tighter when deliveries start,” one Chinese cobalt trader said.
Fastmarkets’ daily price assessment for cobalt, standard grade, in-whs Rotterdam, was $14.50-16.50 per lb on July 4, widening upward from $14.50-16.30 per lb the day before.
A short-term shortage of cobalt hydroxide in China lent support for the standard-grade metal price to increase because it was assessed at a four year low of $12.90-14.85 per lb on June 6.
Fastmarkets’ research estimates that global cobalt metal production will be 40,500 tonnes in 2023, up considerably from 33,000 tonnes in 2022.
Sources indicate that Chinese refiners have been busy increasing cobalt metal production rates over the course of 2023 so far, with one source believing that this was done to prepare for the SRB stockpiling plans.
One change in the current plan compared with previous tenders, market participants noted, was for the SRB to accept a wider range of cobalt metal brands, opening the door to newer Chinese refiners which have yet to obtain London Metal Exchange approval for their brands.
“As long as the metal is 99.8% cobalt content, they aren’t fussed by the brand certification or lack of it. I’ve heard that they’ll accept briquettes too, which could wipe out some cheaper material [if it proves to be correct],” another cobalt trader said.
“These newer brands aren’t approved for export, [and do not] have many consumers in China yet, so there is a lot of stock to dump into this tender potentially,” the trader added.
The SRB was reported to have purchased 1,250 tonnes of cobalt metal late in 2022 after initially making inquiries for 2,500-3,000 tonnes, with deliveries to warehouses continuing until a few months ago, according to market sources.
That purchase was a few months after a similar tender in August 2022 that was scrapped at the last minute because sale documents were leaked. The consequence of this was that cobalt prices went up.
“The SRB tried to buy big volumes in summer last year but called it off, then it bought small in the autumn and is back again now. It must be stockpiling a target volume for one reason or another,” a third trader said.
Some market participants felt, however, that the Chinese cobalt metal market may not find immediate support from the SRB’s stockpiling, due to a tender price that was lower than expected.
Some market participants felt that the tender price should have been above the spot market level because it includes a six-month delivery schedule.
Market participants heard the tender price in the range of 275,000-280,000 yuan ($38,018-38,709) per tonne.
Fastmarkets assessed the price of cobalt 99.8% Co min, exw China, at 270,000-320,000 yuan per tonne on June 30, unchanged from the previous pricing session.
Keep updated with the latest news and insights on our cobalt market page.
