The standard-grade cobalt price – the benchmark for physical settlement across the cobalt supply chain – was last assessed by Fastmarkets on March 8 at $14.70-15.50 per lb, in-warehouse. This was down by 44.5% from the beginning of the year and by 63.6% from a year ago.
Prices have come under pressure from growing supplies of hydroxide and an overhang of metal not committed to long-term contracts in 2019. Prices were at their lowest since January 2017.
The benchmark low of the standard-grade quote – the basis for cash settlement on the new LME contract – has moved by as much as 9.5% during a single pricing session so far this year. (Fastmarkets assesses cobalt prices on Wednesdays and Fridays.) Average monthly prices fell by 24% in February alone.
Following the slump in price over the past year, cobalt has attracted renewed interest among carmakers, but the ability to hedge will be a necessary part of the procurement process.
“It’s less about price [for the original equipment manufacturers] and more about getting the supply and their contracts watertight,” one banking source told Fastmarkets recently. “If the price is $17 [per lb] at the end of all that, then all well and good.”
The final settlement price for the new LME cobalt contract will be an arithmetic average of the twice-weekly Fastmarkets standard-grade cobalt price in the expiring contract month. Fastmarkets achieved type 1 IOSCO assurance for its standard-grade cobalt price in August last year.
Click here for the cobalt contract specifications.
Fastmarkets will host a webinar alongside the LME on April 8 to introduce the new cash-settled cobalt contract. Register here.
See also: Why is cobalt trading below $20 per lb?