Emerging traders are getting involved in the spot market and are showing extensive interest in considering the commodity as an investment material, just like cobalt metal, they added.
Cobalt sulfate was a producer-to-consumer market years ago, but thanks to the robust outlook for uptake of electric vehicles (EVs) over the next few decades, traders with an appetite for investment have emerged in the spot market in recent years to add fresh liquidity.
Cobalt sulfate, nickel sulfate and manganese sulfate are the key materials needed to produce the nickel-cobalt-manganese (NCM) lithium-ion batteries that ultimately serve the EV industry.
In order to track the market at a time of increasing liquidity, Metal Bulletin plans to launch an assessment of Chinese cobalt sulfate prices in early May.
Some delegates to the conference in Shanghai attributed the momentum in the Chinese cobalt sulfate price that has been seen since the start of this year to investment buying interest.
“People are treating cobalt sulfate just like cobalt metal, as an investment product, and have conducted stockpiling, which was one of the drivers behind the previous price rise,” one delegate said.
The Chinese cobalt sulfate price jumped to about 145,000-150,000 yuan ($23,077-23,872) per tonne two weeks ago, compared with around 110,000-120,000 yuan per tonne in mid-January, according to market participants.
But the price has softened more recently on thin buying appetites among consumers who believe that the price may falter as a direct result of China’s new EV subsidy policy. This underpins the use of the high-nickel battery technology that gives EVs a longer driving range and higher energy density.
Although some traders have embraced the legacy cobalt sulfate market and are willing to invest and expand their business, this does not mean that there will definitely be a significant growth in the number of market participants in the near future.
“There are quite a few restrictions on the cobalt sulfate market that set hurdles for traders that otherwise would facilitate extensive activity between producers and consumers,” one trader said.
“Pressure on finances together with payment terms raise the threshold [for market participation], especially for medium-sized and small trading firms,” he added.
Trading volumes in the cobalt sulfate market are much larger than is usual for cobalt metal, with consumers buying at least one or two truckloads of material. One truck carries about 30 tonnes of cobalt sulfate, according to market participants.
“Cobalt sulfate trading requires stronger finance books. So medium-sized and small traders can only occasionally trade the material,” the trader said.
In addition, the legacy payment terms that must be met to ensure bank acceptance of payments have made traders hesitant about becoming actively involved in the market.
“If cobalt sulfate is traded more on a cash basis rather than bank acceptance,” a second conference delegate said, “we will definitely see an increasing number of trading companies in the market.”
The market for cobalt sulfate is becoming more mature, market participants said on the sidelines of Metal Bulletin’s Battery Materials Conference, in Shanghai, which is being held Wednesday-Thursday April 18-19.