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There has been an obvious drop in imports of cobalt concentrates by Chinese buyers since the fourth quarter of 2015. China imported 32,292 tonnes of cobalt concentrates in the third quarter of 2016, down almost half year-on-year.
In January-October 2016, total shipments of cobalt concentrates and ores to China had slipped 34% year-on-year to 129,462 tonnes, according to Chinese customs data.
In contrast, China imported 139,419 tonnes of cobalt intermediates (mainly hydroxide) in first ten months of 2016, a slight fall from 141,173 tonnes in the same period of last year
The slight decrease in import volumes of cobalt intermediates does not necessary mean an actual decrease on tonnages of cobalt contained, according to a cobalt analyst from a major cobalt refinery in China.
“Besides, it is also related to whether the importers report dry or wet weight of the cobalt intermediates to customs,” the analyst said.
The cobalt content of hydroxide is typically around 25%+ and the content in concentrates is normally less than 10%, so it would suggest an even greater shift in terms of imported cobalt units.
Signs pointing to falling popularity in concentrate So why has the market suddenly turned its back on cobalt concentrates?
The shift did not start this year, a trader told Metal Bulletin. Many signs have been pointing to this trend for some time.
The government of the Democratic Republic of Congo (DRC), which has the world’s largest cobalt reserves, has made clear its intentions to impose an export ban on its cobalt raw materials.
Although the DRC has repeatedly pushed back the ban for the past few years, Chinese buyers have already pre-empted a potential export ban by turning to intermediates.
Another factor driving Chinese buyers towards cobalt intermediates is that the cobalt ores and concentrates are no longer suitable for Chinese refinery systems.
Chloride ores existing in the superficial layers of cobalt mines have been exhausted. Only sulphate ores are available in deeper mining, which need additional processing into downstream products at additional cost to Chinese refineries, according to a source at a cobalt refinery in China.
Unlike international refineries which are equipped with a sulfurizing processing system, most Chinese refineries were designed with a chloridising processing system, a cobalt trader from China said.
As a result, Chinese refineries now largely prefer to purchase cobalt intermediates directly, which do not require this processing step, a producer in China said.
An Amnesty International report alleging human rights violations at some artisanal cobalt operations in the DRC released earlier this year has further weighed on cobalt ore and concentrate import activities.
Many Chinese refineries and downstream cobalt producers have become increasingly concerned about the origin of ores and concentrates that are not directly from traditional mining facilities.
As a result, more Chinese buyers turned to cobalt intermediates, whilst at the same time seeking clean concentrates.
Cobalt imports in 2017 The overall supply of cobalt raw materials to China in 2017 will remain stable on 2016, a source from a cobalt refinery in China told Metal Bulletin.
China will import as much as 10% less cobalt concentrates next year, and cobalt intermediates will make up the difference, another cobalt producer predicted.
“The majority of materials we import next year will be cobalt intermediates due to the report on artisanal mining this year,” a third cobalt refinery source said.
A number of Chinese refineries and traders have become sensitive to the trend and have made investments to secure the supply of cobalt intermediates.
The cobalt-contained output for copper-cobalt projects in which Chinese companies invested in DRC in 2016 will reach 16,000-18,000 tpy, the majority of which are cobalt intermediates and alliage blanc, according to the data released by the cobalt branch of the China Non-Ferrous Industry Assn and information provider Antaike.
However, sources said they foresee a tightness of raw materials supply, including that of cobalt intermediates, next year amid an uptick in sentiment on the growing production of electric vehicles in China.
As a result, rumours have spread that end-users in China have talked to cobalt raw materials providers to lock both supply and price.