Cobalt market experiences volatility ahead of fourth quarter: LME Week

Uncertainty over growing bullish sentiment in the cobalt market is among the main conversation topics likely to feature in meetings throughout LME Week, which runs from October 9-13

The cobalt metal market has undergone a reversal in recent days following a change of sentiment, with restocking interest also incentivizing higher prices.

Uncertainty over how long the rally could persist comes ahead of a key period for the market when long-term cobalt metal, hydroxide and sulfate supply agreements are negotiated. Initial conversations for these agreements usually begin during LME Week.

Cobalt metal sentiment has picked up with repeated deals pointing to higher achievable numbers following Fastmarkets’ Battery Raw Materials conference, which ran from September 18-20.

“All [metal] producers seem sold out; it’s hard not to see a short-term upward movement, although I don’t think it will last,” a cobalt trader said after the conference.

“Demand isn’t great, neither is the [cobalt] intermediates market so this rise is just a sentiment thing for now,” the trader added.

Fastmarkets’ latest price assessment for cobalt metal, standard grade, in-whs Rotterdam, was $14.50-15.35 per lb on September 29, widening upward from $14.50-15.10 per lb a day earlier. The latest assessment is up from $13.60-14.60 per lb on September 19.

Whilst metal sentiment looks to be bullish, a bearish tone continues to permeate the cobalt intermediate complex, according to participants, creating a sense of uncertainty in the market.

The cobalt sulfate market is one part of the intermediate complex and has weakened over the course of the summer months causing some volatility across the market while sentiment in the metal market strengthened.

Poor demand from the consumer electronics sector in China and expectations of increased cobalt hydroxide availability in the fourth quarter of the year were blamed for the sulfate decline.

Cobalt hydroxide is used as a precursor material in the production of cobalt metal and cobalt sulfate among other products.

“Hydroxide fundamentals will depend on the sulfate market; there is a lot of volatility, but buyers aren’t picking up sulfate material despite some having low inventories,” a cobalt market participant said.

Fastmarkets’ latest price assessment for cobalt sulfate, Co 20.5% basis, China ex-works, was at 36,500-37,500 yuan ($5,010-5,148) per tonne on September 27, unchanged from September 22. But the latest assessment is down from 40,000-42,000 yuan per tonne on August 2.

Despite sulfate prices falling, buyers are reportedly in no rush to secure material with themselves facing poor demand and the onset of a week-long public holiday across China from September 29- October 7. As a result, liquidity across much of the cobalt intermediates market has reportedly slowed.

“I’m not expecting too much to be done whilst the Chinese market is away. They may come back after with some appetite, but discussions then will focus on agreeing long-term contracts,” a producer source said.

“The main driver of hydroxide is the sulfate market, we’re looking at its performance and the visibility of next year’s orderbook; those will have significant effect on hydroxide for us,” the producer source added.

Fastmarkets’ daily cobalt hydroxide index 30% Co min, cif China, was calculated at $7.50-7.70 per lb on September 29, unchanged since September 25.

Another watchpoint for the market is the approaching shipments of hydroxide from China Molybdenum Co (CMOC), having reached an agreement with Democratic Republic of Congo (DRC) state-owned miner Gécamines earlier this year.

CMOC were under an export ban of material but were permitted to produce material which led to a stockpile of cobalt and copper. The export ban has been lifted. The stockpile as well as fresh material from the Tenke Fungurume mine is now reaching China, according to sources.

Some market participants have also pointed to upcoming presidential elections in the DRC which could have an impact on logistics within the country.

“The DRC has elections in December, I would imagine people would like a good portion of material out of the country by then just in case the results are unfavorable or disruption occurs,” a second cobalt trader said.

Shifting dynamics for battery demand

A slow consumer electronics market and a developing preference for cobalt-free battery chemistries has dampened longer-term cobalt sentiment for some market participants.

The shift toward cobalt-free chemistries comes largely from ethical concerns for some sources of cobalt. Certification schemes have been set up to certify responsibly sourced material.

“Electronics is a big driver for hydroxide, as well as electric vehicle (EV) demand from EV chemistries that use cobalt. Cobalt content in EVs could be reduced and going forward how that’ll develop is difficult to predict,” a conference attendee said.

Some original equipment manufacturers (OEMs) have stated they will continue to use nickel cobalt manganese (NCM) batteries for their EV manufacturing despite others holding a preference for primarily lithium-based batteries.

One market participant said they expected a reduction in the volume of cobalt used within EVs but felt NCM batteries still had their place within the transition to low-emission vehicles.

The cobalt market is forecast to be in a surplus of 7,000 tonnes in 2023 with that figure rising to 14,000 tonnes in 2024, according to the Fastmarkets research team.

But despite concerns over longer-term sentiment, total cobalt demand is still expected to rise from 233,000 tonnes forecast in 2023 to 260,000 tonnes in 2024.

Decreasing sulfate output

Some market participants told Fastmarkets they were expecting to see a reduction in the production of cobalt sulfate later this year though expected prices to remain relatively stable, given the current high hydroxide production costs.

One avenue that some Chinese cobalt producers have been exploring is to increase metal production at the expense of sulfate production by modifying existing production lines. With the switchover reportedly “quite simple” according to one consumer, some participants are anticipating a sizeable influx of metal material into the domestic Chinese and international market as a result.

“If you want to convert [to metal] you have a lot to consider. It’s not the absolute value, it’s the future direction you are switching too. Buyers are in the driver’s seat now because of the supply situation,” a third cobalt trader said.

LME Week looks to be shaping up to be a significant point for cobalt sentiment, with sellers hoping sentiment will continue to strengthen once meetings are completed.

Learn more about Fastmarkets’ cobalt long-term forecast

The Fastmarkets NewGen cobalt long-term forecast leverages our heritage in providing price data and market intelligence in the cobalt market. These insights are paired with expert economic modeling and data to provide market participants and investors with unmatched clarity on how the cobalt market will evolve in the next 10 years.

Learn more

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