Chinese cobalt metal prices at 8-year low in oversupplied market

Fastmarkets’ twice-weekly price assessment for cobalt 99.8% Co min, ex-works China was 190,000-230,000 ($26,243-31,768) yuan per tonne on Wednesday, down by 7,000-18,000 yuan from 197,000-248,000 yuan per tonne on April 26.

This is the lowest level recorded since August 2016, when monthly average prices were at 205,555-217,822 yuan per tonne, according to Fastmarkets’ pricing data.

This decline was attributed to domestic capacity expansion in China, which has created a general pessimistic outlook among market participants.

“Market fundamentals are the main reason prices are so low. Domestic cobalt metal supply far exceeds current demand. With more cobalt metal projects expected in the second half of the year, market sentiment has become especially bearish due to anticipated oversupply,” one Chinese cobalt metal trader told Fastmarkets.

China’s domestic cobalt metal supply is estimated to reach 32,000 tonnes in 2024, up from 21,000 tonnes in 2023, according to Fastmarkets research.

The increase is mainly due to several Chinese metal producers planning to expand cobalt production in response to the surging availability of raw material, cobalt hydroxide, according to producer sources.

Mined supply of cobalt hydroxide is estimated to reach 160,000 tonnes this year, up from 152,000 tonnes in 2023, according to Fastmarkets research.

CMOC, one of the largest cobalt miners in China, reported a 392% year-on-year increase in cobalt output for the first quarter of 2024 and plans to produce between 60,000 tonnes and 70,000 tonnes of cobalt in 2024, up from just over 10,000 tonnes in 2023.

“This increased capacity of mined cobalt raw material has set an oversupply tone for the cobalt market in 2024. The consumer side cannot catch up with the pace of this surge and the market is likely to remain sluggish,” a second cobalt metal producer said.

In addition, many cobalt producers have switched from sulfate to metal production since September 2023, further exacerbating the cobalt metal oversupply.

Cobalt metal, which has a higher profit margin and is easier to store, has become increasingly favored compared with cobalt sulfate, according to one producer source.

The price gap between China’s sulfate and the standard-grade metal price was a discount of $3.46 per lb during the week of April 30.

Rising Chinese cobalt exports to European market due to tolling agreements

The increase in cobalt metal production has resulted in rising Chinese cobalt exports to the European market through tolling agreements, which have become a key strategy for addressing excess capacity.

These agreements between major mining companies and Chinese smelters have enabled Chinese processed cobalt to enter the European market.

The earliest tolled exports arrived in the market in March 2024, according to trader sources.

Chinese cobalt metal exports reached 988 tonnes, yielding a 237% year-on-year increase, according to Chinese customs data.

Market participants also held positive expectations towards the April figure, which will be released on May 20.

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