But, seaborne prices for processed materials could become tight because China is the world's largest processor of cobalt, some of which is exported.

Supply and stocks 
  • Production halts (Mutanda) have caused concern about tightness, but producer stocks are high. 
  • A slowdown in Chinese demand for electric vehicles (EVs) is likely to lead to less demand for cobalt intermediates and therefore a drop in hydroxide payables. 
  • But as China is the main processor of cobalt products, some of which are exported, disruptions to exports could create shortages in the supply chain ex-China.
  • We expect already weak demand in China to be hit further as demand for NEVs suffers while household and business confidence likely deteriorates in the short term. 
  • But European original equipment manufacturers (OEMs) relying on lithium battery cells from Asia may suffer supply chain disruptions - this could hit EV manufacturing. 
  • If prolonged, disruptions will this persuade the EU to delay the introduction of CO2 penalties, penalties that the traditional internal combustion engine OEMs cannot really afford anyway given the depressed auto market. 
  • Demand for cathode materials from non-Chinese based production likely to pick-up.
Logistics since the outbreak began 
  • Delivery of shipments to China may be delayed due to port and transport congestion.
Lessons learned 
  • Avoid being dependent on supply chains from one country/region. 
  • Shorten supply chains and diversify supply chain were possible. 
  • Should be good news for European battery industry.
See also - Coronavirus impact on battery raw materials:Lithium

This article has been written by
our team of analysts at Fastmarkets, who are responsible for providing an independent view on market developments and forecasting their future performance.