Strong cobalt prices in 2018 boost Vale revenues despite lower sales volumes

Vale’s cobalt sales volumes totaled 4,974 tonnes in 2018, down from 5,013 tonnes a year before. But cobalt revenues were higher year on year at $313 million last year compared with $258 million in 2017.

Cobalt prices rallied over the course of 2017 and early 2018 on optimism surrounding electric vehicle adoption (EV), related aggressive buying and forecasts of supply deficits for cobalt.

In April last year, cobalt metal prices hit near 10-year highs of $43.70-44.45 per lb, in-warehouse, according to Fastmarkets’ benchmark standard-grade price assessment.

Standard-grade cobalt prices have been under downward pressure since the end of last year on producer pressure to destock and weak consumer demand. Fastmarkets’ price rose last week for the first time since late October 2018 to $13.75-14.40 per lb on Friday March 29 on some consumer buying. But the restocking does not signal the beginning of a return to 2018’s multi-year highs, Fastmarkets reported on Monday. 

Vale has identified the production of battery raw materials to feed demand for EVs as core to its business model. The company also invested an additional $500 million in its Vale New Caledonia (VNC) nickel operations in the South Pacific due to expectations of increased demand from rising EV output, as Fastmarkets reported in December.

The miner’s assumption for that project is that EV production will reach 14 million units by 2025 from 1.8 million units in 2018.

“2018 was marked by the cobalt streaming deal that unlocked Voisey’s Bay expansion, granting Vale higher future exposure to nickel, cobalt and copper resources,” the company said, despite the difficult second half of 2018 when rising supplies of cobalt hydroxide have weighed on the market. 

Cobalt hydroxide payables – the percentage of the cobalt metal price paid to purchase intermediates – stand at 66-68%, according to Fastmarkets’ assessment. Payables were agreed at 85% and higher for supply of hydroxide in 2018, when intermediates supplies were tighter.

Vale has yet to release precise production guidance for 2019.