Chinese cobalt prices drop on falling futures prices, muted buying appetite

Chinese cobalt metal and salts prices fell in the midweek pricing session following an 17.8% drop in local futures contract prices, which dented buying sentiment.

Fastmarkets MB’s Chinese domestic cobalt metal price fell by 3.6% to 450,000-490,000 yuan per tonne ($25.52-27.68 per lb, China-VAT free) on Wednesday October 17, from 475,000-500,000 yuan per tonne on Friday.

Market participants attributed the fall in spot prices to the sharp drop in cobalt contract prices on the Wuxi Stainless Steel Exchange in China since last week. Cobalt futures prices were adversely affected by the disappointing performances of global equity markets which dampened sentiment for the minor metal.

The November cobalt contract price on the Wuxi Stainless Steel Exchange dropped to 383,000 yuan per tonne at the close on October 17, compared with 466,000 yuan per tonne one week earlier.

“Negativities in the equity market and macro economy, and the sharp fall in cobalt futures prices jeopardized the positive sentiment for the price outlook that built up ahead of China’s National Day holiday on October 1-7,” a Chinese trader said.

“The futures prices fell too quickly, and people just panicked,” a second trader said. “You can still hear high offer prices, such as 490,000 yuan per tonne, and you can also hear quotations as low as 430,000 yuan per tonne. In either case, consumers are not interested in buying.”

As a result, quite a few suppliers have stopped making offers, and are waiting for more clarity in how the market will develop.

“There is no point making low offers to destock at the cost of losing money,” the first trader said.

The price differential between Chinese and international cobalt metal prices has widened again amid a relatively stable market outside China.

Fastmarkets MB assessed the low-grade cobalt benchmark at $33.50-34.40 per lb on October 17, unchanged for the fourth consecutive pricing session.

This has taken the differential between the low end of the price ranges for Chinese and international cobalt prices to almost $8 per lb as of October 17, compared with about $6 per lb on September 28, less China VAT at 16%, according to Fastmarkets’ calculations.

The differential was at its widest on July 6 when the arbitrage came to $8.21 per lb.

“Again, Chinese suppliers will be more willing to export,” a third trader said.

Cobalt sulfate price drops after six weeks of stability
The Chinese cobalt sulfate price broke its six-week streak of stability on Wednesday, dipping by 2.2% since Friday’s assessment.

Fastmarkets MB assessed the Chinese ex-works cobalt sulfate price at 88,000-92,000 yuan per tonne on Wednesday, compared with 90,000-94,000 yuan per tonne previously. Its adjustment to the low-grade cobalt low-end price came to a discount of $1.68-1.91 per lb, from $1.57-1.79 per lb in the earlier assessment. 

Buying interest faltered after the cobalt futures prices plummeted, but persistent weak demand for cobalt salts was the core driver behind the retreat in prices, market participants told Fastmarkets.

“It is not only about the slide of cobalt futures prices. The main reason for cobalt sulfate price to move down this week is weak demand,” a cobalt sulfate producer said.

“Cobalt sulfate production has been expanded, while the government subsidy threshold for electric vehicles is higher than before,” he added.

Some suppliers have reduced their offers in an attempt to destock quickly and secure profits ahead of further price falls. Some others have stopped making quotations, hoping to see clearer price direction soon.

“We would rather wait and see where the floor price will be this time,” the same producer said.

Meanwhile, consumers who do not have a positive outlook of the market have taken a more cautious approach to procurement.

“People who came back from the London Metal Exchange Week [on October 8-12] suggested the bearish sentiment strengthened during the yearly gathering as market participants have concerns over the abundant new supply in 2019,” a cobalt sulfate consumer said.

Furthermore, a number of consumers may have cashflow constraints near year-end, which limits their appetite for cobalt sulfate, market participants told Fastmarkets.

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