China’s GEM resumes cobalt production at Jiangsu metal refinery

Chinese cobalt producer GEM has been allowed by local authorities to resume cobalt production at its plant in Jiangsu from February 25, the company said on Monday February 27

The reopening of the plant comes after GEM’s Jiangsu facility was forced to suspend production on January 7 after a fire.

The plant’s target production of cobalt metal for March was now 180 tonnes, compared with 250 tonnes per month prior to the fire, a company source said.

Production will be at a rate of 180-200 tonnes per month between March and June, and will ramp-up to 300 tpm from July, when a scheduled upgrade of a production line will be completed.

Despite resuming production of cobalt metal, GEM cannot deliver orders to international customers in the near term, it said, because it needs to be granted a new tolling license by Chinese customs.

“Now that our production of cobalt metal has resumed, the new output needs to be verified by Chinese customs before it can be exported,” the company source said.

“The verification process can take as long as 4-6 months. Until this is done, we cannot export materials to the international market,” he added. “But we can start delivery of long-term supplies to our Chinese customers now, because no verification is needed in the domestic Chinese market.”

Fastmarkets research has estimated that global cobalt production will show a surplus of 4,000 tonnes in 2023, despite demand forecasts rising to 203,000 tonnes from 178,000 tonnes in 2022.

“Even though we cannot sell materials to the international market at the moment, leading to low supply there, I don’t think international cobalt metal prices can rise by much,” the GEM company source said.

“There’s very thin consumer demand. Materials are mostly traded between intermediaries and spot market inventory remains large, which will cap the upward potential of international cobalt metal prices,” he added. “But in the short term, we may see some fluctuations [of international cobalt metal prices].”

Despite the announcement, prices for standard-grade cobalt metal increased slightly following a rise in liquidity in Fastmarkets’ first pricing session since the GEM restart.

The price for cobalt, standard grade, in-whs Rotterdam, was assessed at $15.15-16.50 per lb on February 27, up from $15.00-16.25 per lb on Friday of last week.

International market participants were divided over what the restart of production could mean.

“I have some difficulty in seeing the upside with the refinery back online, to be honest,” one cobalt trader said. “It will reduce the appetite from Chinese buyers who have been bidding international traders.”

Some Chinese buyers were reported to have been sourcing material from European trading firms in recent weeks, during the GEM plant’s closure, to meet domestic demand obligations for cobalt metal.

Others were more supportive of price increases. “If they can’t export that material, the European market will remain as tight as it is for the next few months,” another cobalt trader said.

But a third trader added: “Units are units. If more units come to any market without corresponding demand, it will always mean a lower price.”

Keep up to date with the latest news and insights on our cobalt market page.

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