Chinese cobalt prices rise on massive SRB stockpiling

Cobalt metal prices quickly rose amid thin trading in China on Wednesday, following massive purchases by China’s State Reserve Bureau (SRB) the previous day.

Cobalt metal prices quickly rose amid thin trading in China on Wednesday, following massive purchases by China’s State Reserve Bureau (SRB) the previous day.

The SRB bought 1,800 tonnes of cobalt metal through a Tuesday afternoon bidding from a few major producers and traders, who have been requested to finish deliveries within the next four months, according to several sources familiar with the situation.

Including about 400 tonnes of cobalt metal stockpiled in September, the SRB has mopped up a total of about 2,200 tonnes of cobalt metal from the market. As a result, those with cobalt on hand are lifting prices.

On Wednesday, cobalt metal was trading at 204,000-220,000 yuan ($31,935-34,440) per tonne, sharply higher than the 198,000-209,000 yuan per tonne range recorded for the previous pricing session.

Despite the higher prices, it has become very hard to obtain any cobalt metal from the market, sources said.

Jinchuan Group lifted its list price by 3,000 yuan per tonne to 214,000 yuan per tonne on Wednesday morning, and is providing only a very small amount of cobalt to the market, according to the company.

“We are not selling for at least these two days – there has been very little cobalt imported so far this year, and the amount the SRB’s latest stockpiling bought up equals more than six months’ worth of Chinese consumption,” a major trader said.

“We are now only supplying some core clients at 205,000-208,000 yuan per tonne, and nothing to traders or small buyers at all,” another major importer said, adding that two traders had already called him for cobalt early in the morning.

“The SRB’s purchase price was not high, but the amount was huge, resulting in a big influence on the market,” an active trader said.

The SRB is believed to have purchased cobalt at prices above 200,000 yuan per tonne on Tuesday.

“We don’t have anything to sell now: as a matter of fact, we may even have to buy some,” a third major trader said.

Market participants expected to see more imports in coming months, as there is very little cobalt metal available in the domestic market. Jinchuan, for example, had already finished its annual sales plan even before the SRB’s stockpiling move. Therefore, some may have to turn to the international market for more cobalt units, sources said.

Many market participants are expecting the effects of the SRB’s stockpiling to last into the coming year.

Yet some remained wary.

“Look at recent international geographical tensions: is it possible that cobalt prices may be tamed just like base metals?” a consumer asked.

He added that western countries are entering a period of traditionally slow consumption as the holiday season approaches.

On the cobalt salt side, major producers are yet to start their negotiations with buyers for the coming month.

One major cobalt salt producer on Wednesday raised its list price by 2,000-3,000 yuan per tonne for the coming month.

Another producer held its list price unchanged due to mounting liquidity pressures in the fourth quarter and an ailing downstream market.

While there are expectations of higher cobalt metal prices on the international markets as a result of the SRB’s stockpiling, Chinese companies are not very worried about ongoing raw material negotiations.

“It may be still months away before we sign the 2016 supply contract with our suppliers. And the key is there is no shortage of [cobalt] raw material at all,” a major player said.

Linda Lin

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