COBALT INSTITUTE CONF 2019: Six key talking points as industry heads to Hong Kong

As cobalt market participants head to Hong Kong for the Cobalt Institutes’ annual conference on May 15-16, Fastmarkets summarizes the key talking points that are likely to dominate discussions at this year’s event.

How will cobalt prices fare over the summer?
As it stands, standard-grade cobalt prices are up 22% since the end of March, but the rally has stalled over the past couple of weeks and the benchmark low of the range fell $0.10 per lb at the end of last week.

Activity has subsided after buyers covered their immediate requirements, and market participants are now anticipating the summer season, typically marked by weaker demand translating into weaker prices.

On one hand, metal sits in tighter hands than in the first quarter of the year, and some producers are believed to be sold out until the end of the year. On the other, underlying hydroxide stocks are high, and Chinese sulfate buying is hesitant, both of which are still putting pressure on the cobalt complex as a whole.

Will buyers accept cobalt payables at 70%?
Fastmarkets’ assessment for cobalt payables has held at 67-69% of the standard-grade low since mid-April, and buyers have so far resisted accepting producers’ offers at 70%.

After pronounced fluctuations in cobalt prices over the past 18 months, hydroxide supply and prices are being discussed at regular intervals to enable payables to reflect changing fundamentals.

On the potential upside, consumers are believed to be sitting on low stocks and keen to lock in some units; but on the downside, port inventories are understood to be high, Eurasian Resources Group’s (ERG) Metalkol Roan Tailings & Reclamation (RTR) project is ramping up, and Glencore is treating and exporting some of its high uranium stock.

How will automakers lock in their cobalt supply?

While a forecast hydroxide surplus looks likely to keep cobalt prices in check in 2019, the longer-term picture for cobalt consumption still looks strong once electric vehicle adoption ramps up in the next three or so years.

Automakers are, as BMW’s recent deal to buy CTT and Murrin Murrin metal shows, contending with ethical red flags along parts of the cobalt supply chain, adding complexity to their procurement programs.

Scope for other carmakers to take a similar approach is limited, and it is agreed that it is impossible to realize a cobalt supply chain without the Democratic Republic of the Congo, necessitating clarity and agreement on what constitutes responsible sourcing.

Will Chinese metal exports continue to pick up?
Chinese cobalt metal exports picked up quickly in March with an outflow of 163 tonnes, which almost doubled the country’s exports in February.

Western traders and Chinese suppliers are likely to have negotiations during the conference, however it is still unknown whether the market will see more blue metal shipments flowing out of China in near future.

The uncertainty mainly stems from the expectation gap between Chinese suppliers and western traders who are now bidding much lower than the period in early April when the cobalt benchmark price showed strong momentum.

Will cobalt sulfate price drop to previous low?

The Chinese cobalt sulfate price has been softening since mid-April as a direct result of the sluggish demand following the announcement of the country’s latest electric vehicle (EV) subsidy policy, which was also one of the major drives behind the plummet of the battery raw material price last year.

Some concerns were that the Chinese cobalt sulfate price might drop to or even below the previous low of 45,000-47,000 yuan ($6,551-6,842) per tonne reached in late March, and refineries might be faced with losses again.

In response to the falling cobalt sulfate price, some refineries had already cut output and shifted to production of other cobalt salts, including cobalt chloride, but the resultant support to the cobalt sulfate price remains in check.

Will 5G reshape the cobalt tetroxide market in the near term?
With several mobile phone providers starting to develop mobile phones that support the fifth generation (5G) of cellular network technology, market spotlight has been cast on high-voltage cobalt tetroxide which is essential to produce the lithium cobalt oxide (LCO) battery required by 5G mobile phones.

Meanwhile, the majority of cobalt tetroxide produced currently can only serve fourth generation (4G) mobile phones, therefore, the development of 5G mobile phones is like to reshape the cobalt tetroxide market as producers shift to high-voltage cobalt tetroxide production.

That said, it is still uncertain when such a change may take place extensively in the market due to the bottleneck of mobile phone safety performance and higher production cost for high-voltage LCO batteries, according to market participants.

Here, Fastmarkets reviews price moves in the cobalt markets since last year’s conference, which took place on May 23, 2018.

Join members of Fastmarkets’ cobalt price reporting and research team for a web seminar on Tuesday June 18 at 9.30am London time to discuss recent price moves in the cobalt market and how industry developments might affect the market going forward. Click here to register now.