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Cobalt market participants fear President-elect Trump could walk back EV legislature and impose stricter tariffs on Chinese-origin cobalt metal and EVs.
The Inflation Reduction Act (IRA) is a key piece of legislature that was signed into law by President Joe Biden, helping to bring an estimated $312 billion of planned and provided investment into US EVs and EV manufacturing.
President-elect Trump has said in the past his intentions to “end the electric vehicle mandate on day one” with his view being that he is “saving the auto industry from complete obliteration.”
But this may prove more difficult than it appears, with current and planned EV manufacturing hubs predominately appearing in his own Republican party states.
“I was driving across the South recently and the amount of EV factory construction in these red [Republican] states was incredible, they may be anti-EV but it’s providing well paid jobs,” one market participant told Fastmarkets.
Shares in US electric vehicle manufacturer Tesla jumped on news that President-elect Trump had won the election, indicating perhaps that Tesla chief executive officer Elon Musk could help soften intended pullbacks on government incentives for EVs.
The IRA currently provides up to $7,500 in credits for consumer purchases of new EVs provided the vehicle meets the necessary sourcing criteria.
“It’s too soon to say what the impact will be but the prospects of additional tariffs is definitely increased, Indonesian material might fall under that due to the joint-ownership, next year will be interesting,” a trader said.
Some traders have looked to export Indonesian cobalt metal into the US because it currently has no tariffs imposed upon these materials. But other participants have queried the potential for tariffs due to the joint-ownership structure of some projects where Chinese companies hold stakes.
“These Indonesian cut cathodes would work for a lot of US consumers and at a much cheaper price point, we are going to send any metal that is non-Chinese to the US now going forward because of the potential for more tariffs,” a second trader said.
Fastmarkets’ daily price assessment for cobalt, standard grade, in-whs Rotterdam was $9.75-11.80 per lb on Wednesday November 6, unchanged from the previous day, but compared with $23,50-25 per lb on August 16, 2022, when the IRA passed in the US.
“The US is fine with the Indonesian nickel imports despite the joint ownership there so I don’t think they would single out cobalt and stop that,” the second trader added.
The US features prominently in the alloy-grade market for cobalt metal, with strong production hubs for commercial aerospace and defense applications, with medical usages and industrial gas turbines also a source of demand. Cobalt is preferred due to its high temperature and wear resistance.
The US consumers are probably nervous for their sourcing requirements and not just for cobalt either, if tariffs get brought in for widespread material imports including non-Chinese cobalt too that will really hurt.
“In our small world of cobalt, it will bring focus onto the top alloy grade brands with people wanting to buy and hold those,” he added.
Fastmarkets’ daily price assessment for cobalt, alloy grade, in-whs Rotterdam was at $14.35-15.40 per lb on Wednesday November 6, unchanged from the day previous. The assessment stood at $24-25.50 per lb on August 16, 2022.
The US currently has a 25% tariff on Chinese refined cobalt metal, with much of the present metal oversupply refined in China and then exported to Europe.
Year-to-September Chinese exports of cobalt metal globally totaled 5,992 tonnes, up 42% year on year from 2,525 tonnes, in data published by China’s General Administration of Customs (GACC).
The tariff has to an extent insulated the US from the impact of the ramp up in exports with prices for cobalt that can access the US tariff-free seeing higher levels than in Europe.
Some market participants believe the tariff could be increased to 60%. The impact of such a move has split opinion.
“60% tariffs essentially closes that market to Chinese material which will continue to remain in Europe, if US demand picks up then prices could also see increases,” a fourth trader said.
“To me, 25% or 60% doesn’t change much, there isn’t much Chinese material that can go into the US due to customers being wary of its origin. Maybe there is room for more Western material to go into the US from our side now, but it depends on the total demand there,” a fifth trader said.
“There are tariffs already imposed anyway, what more will increasing it do?” a sixth trader said.
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