Competitive negotiations for 2020 long-term contracts, macroeconomic concerns and cautiousness around the pace and timing of an uptick in cobalt usage by the battery sector have also created more reserved sentiment, market sources told Fastmarkets.
Fastmarkets assessed the price for cobalt standard grade, in-whs Rotterdam at $16.80-17.50 per lb on Friday November 15, down by 20 cents on both ends of the range compared with November 13. The standard-grade cobalt price stood at $17.20-17.80 per lb on November 8.
Fastmarkets’ price assessment for cobalt alloy grade, in-whs Rotterdam stood at $17.20-17.70 per lb on November 15, down from $17.30-17.80 per lb on November 13 and $17.60-18.10 per lb on November 8.
“It seems fairly easy to get offers compared with a month ago but I still don’t see any panic. I don’t think there’s any shortage so we might see some more softness,” one trading source said.
Others added that the market has been more focused on discussing and finalizing the terms of 2020 long-term contracts, serving to alleviate immediate concerns around weak spot demand.
“I sense that it’s weaker, but it’s not like sellers are calling in to offload volume,” a consumer source said.
With negotiations for next year more aggressive than expected, progress has been slow, not helped by cobalt prices coming off their recent highs.
“There are lots of offers about and producers are coming towards the year end. Long-term contract negotiations are competitive - it’s tapered some of the Mutanda [closure] optimism,” a second trader source said.
“There’s definitely material to liquidate. It’s unfortunate timing [that the market has started to fall]: people want to delay their decisions for a couple of weeks,” a producer source said.
While demand from the aerospace sector is considered strong and the eventual consumption from the electric vehicle (EV) sector provides an upturn longer term, weak interest from the steel industry and a macroeconomic slowdown has seen immediate positivity falter.
“It doesn’t feel catastrophic - there aren’t crazy cheap offers [in Europe] but it doesn’t feel good. Cobalt isn’t immune from the macroeconomic sentiment - it can’t be,” a third trader source said
“EVs are a bright spot but it doesn’t affect the cut cathode market… [demand is] not going to feed immediately into the metal market,” a second producer source added.
Market participants are also focused on China, where prices for metal, salts and hydroxide have been falling more quickly than in the international market.
Cobalt sulfate 20.5% Co basis, exw China, is trading in a range of 45,000-47,000 yuan ($6,420-6,705) per tonne, according to Fastmarkets’ November 15 assessment, down from a recent high of 60,000-62,000 yuan per tonne on October 9.
The effective discount for cobalt sulfate relative to the low of the standard-grade metal quote has widened out to $3.70-4.26 per lb, compared with 0.74-1.29 per lb on October 9.
Buyers in China are keen to avoid having stock on their books ahead of the Chinese New Year, meaning limited spot buying.
“[The market is] obviously pushing lower. The Chinese New Year is early in 2020 as well. There’s plenty around, there’s not a tightness,” a fourth trader source said.
Beyond the new year, market players are taking a conservative approach to anticipated consumption from the battery market
“Some of the refineries are pessimistic on the new year. Battery demand looks weaker due to the subsidy cuts, meaning lower cobalt consumption or even a [short-term] move to lithium-iron-phosphate batteries,” the first consumer source said.
Payables for cobalt hydroxide have also fallen. Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China stood at 63-65% of the low end of the price assessment for standard-grade cobalt on November 13, down from 69-70% in October, with cheaper raw materials costs also filtering through to the metal market internationally.
“It’s a normal consequence: the hydroxide payables are down so at some point the Chinese can start shipping [cheaply produced] metal,” the second producer source said.
Weeks of slow spot buying from consumers comfortable working with low stock levels has brought cheaper offers into the spot cobalt market so far in November.