BATTERY MATERIALS CONF: Cobalt stocks need continued drawdowns for prices to find support – Core Consultants

“You’re really going to have to see stocks come down 20-50%, to the levels seen pre-rally” if cobalt prices are to see some recovery, Smith told delegates at Fastmarkets’ Battery Materials conference in Shanghai last week.

Cobalt sulfate makes up the higher end of that range with supplies still up 38% year on year at around 7,000 tonnes, according to the research group’s stock estimates.

“Unless you have that [drawdown] I don’t see a reason for the price to increase,” Smith said. 

Cobalt sulfate prices are down 63% from a year ago, according to Fastmarkets’ data. The weekly price assessment was at 51,000-55,000 yuan ($7,600-8,200) per tonne, ex-works China, on April 12, down from 140,000-144,000 yuan per tonne this time a year ago.

Cobalt metal prices – which are the benchmark used across the supply chain – rallied from $14.70-15 per lb at the beginning of 2017, to highs of $43.70-44.45 per lb at the end of April last year – a near 10-year high, according to Fastmarkets’ standard-grade assessment.

Prices have fallen heavily from that point on tight availability of credit in China, and oversupply of cobalt hydroxide, ahead of a real ramp-up in consumption from the battery sector, expectations of which has been the driver behind most of the price rally.

At the same time, while prices were falling, its consumers were working through high-priced stock, reluctant to start buying in case of another substantial move on the downside.

As a response to falling prices, producers started reducing output from the third quarter of 2018, leading to a steady drawdown of inventory, Smith told delegates in Shanghai.

As of April 12, Fastmarkets’ standard-grade cobalt price stands at $15.35-16.75 per lb, where they are up from 26-month lows of $13.30-14.20 per lb at the end of March, and traders and consumers have come in to start replenishing metal stocks as the market turned.

But that needs to continue across the supply chain for cobalt prices to stage a more meaningful recovery.

“In the case of some products [such as cobalt chloride], output started increasing from late February, which has negated any price recovery,” Smith said.