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Key takeaways:
The DRC has extended its cobalt export suspension and will introduce a quota system from October 16. With shipments typically taking around three months to reach China, refiners anticipate a gap in supply just as seasonal demand for cobalt sulfate and tetroxide picks up in September and October.
Spot cobalt hydroxide has become increasingly difficult to procure with the current price surge. Cobalt metal, with relatively higher inventories and more competitive prices compared with hydroxide at present, has emerged as a practical substitute.
Several Chinese smelters have purchased metal in preparation, while one major producer told Fastmarkets it has already adjusted its production line to accommodate metal dissolution. Other refiners said similar preparations are under way.
“We are preparing to melt cobalt metal. It has become an unavoidable option given the long shipping cycle for new hydroxide and the high costs of current feedstock,” a cobalt smelter source said.
Another producer said the cost differential was attractive enough to justify the switch, and that the dissolution of cobalt metal would better accommodate their long-term orders for cobalt sulfate because their cobalt hydroxide inventories are running low.
Fastmarkets’ twice-weekly price assessment for cobalt sulfate 20.5% Co basis, exw China was 65,000-70,000 yuan ($9,112-9,812) per tonne on Friday, up by 3,000-6,000 yuan per tonne (7.14%) from 62,000-64,000 yuan per tonne on Thursday and up from 58,000-60,000 yuan per tonne on September 19.
Based on this level, sources said cobalt metal purchased within the range of 260,000-290,000 yuan per tonne could be profitably dissolved into sulfate. Some refiners said they had already stocked metal in advance for this purpose to capture the spread, and some said they have prepared for further increases in cobalt sulfate production.
Dissolving cobalt metal into sulfate, however, has not previously been a common practice. Few smelters have dedicated production lines in place for this process. One major producer said it had facilities designed for briquette but noted that cobalt cathode – the form of metal more readily available in the market – is harder to dissolve and less efficient to handle.
Sources also mentioned that the dissolution process can be lengthy. One producer told Fastmarkets the turnaround time to process cobalt metal into usable sulfate can take around two weeks, compared with a faster cycle using hydroxide.
This extended processing time could limit how much smelters can rely on metal feedstock in the near term, despite the current economic incentives, sources said.
The prospect of refiners turning to metal has also contributed to a sharp rally in cobalt metal prices.
Fastmarkets’ twice-weekly price assessment for cobalt, 99.8% Co min, ex-works China, was 316,000-325,000 yuan per tonne on Friday September 26, up by 8.09% from 290,000-303,000 yuan per tonne on Wednesday, and from 271,000-282,000 yuan prior to the quota announcement.
“We’ve seen prices rise rapidly as the market digests the quota system and as new supply remains constrained. I expect in the short term that prices will not come down easily, given the bullish sentiment across the market,” a trader said.
“I see smelters preparing to dissolve metal as a turning point. It signals that hydroxide inventories are nearly depleted and that more refiners will have no choice but to turn to metal. This will only tighten the market further and keep prices on an upward trajectory,” a second trader said.
What’s next for the global cobalt industry? Get the latest news and updates from Fastmarkets’ team of experts.