Cobalt metal prices fall as Chinese producers adjust to weaker salts demand
Physical cobalt prices fell again on Friday June 8, faced with cheaper metal supplies, seasonally weaker spot demand and poor sentiment, market sources told Metal Bulletin.
Metal has become more cheaply and readily available, as producers in China grapple with weaker prices and demand for cobalt sulfate
“There’s been some extreme pressure on product prices,” a consumer said.
Metal Bulletin assessed the discount available on cobalt sulfate against the low of low-grade metal assessment at $1.11-1.54 per lb on Friday. Sulfate traded with a premium of $0.01-0.32 per lb in early April, according to Metal Bulletin data.
The domestic appetite for salts has weakened in China ahead of the termination of subsidies for low-range electric vehicles in China, leaving sellers looking to offload their stocks in the form of metal to customers overseas.
China exported 925 tonnes of cobalt metal in the first quarter of 2018, up 249% compared with the same period last year.
“There’s more metal there, which makes people panic. China is shaking people up, and sellers [internationally] are worried about being undercut,” a trader said.
Isolated cheaper offers have materialized from sellers inside Europe as a result, and they became increasingly mainstream as the week went on.
“You might be able to get $41.50 [per lb], or lower, if you can find the right person,” a second trader said. “There are some rogue parcels at around $41 [per lb].”
The majority of cheaper offers continue to come from traders, and are believed to amount to relatively small volumes.
“From traders you can get a better deal but the volumes are smaller. They just want to cash out in case it goes to $38 or $39 [per lb],” a second consumer said.
Those units, however, are taking longer to be absorbed, as spot demand for metal has weakened heading into the summer, and consumers are delaying their purchases as prices fall week-on-week.
Benchmark low-grade cobalt prices are down from a near-10-year high of $43.70-44.45 per lb in the second half of April.
“The quietness continues,” the second trader said
“The feeling is that it might reach $39 or $40 [per lb] over the summer. A lot of business has been delayed a bit because the price is coming down; they’d rather buy on the upturn,” a third trader said.
“The [Cobalt Institute] conference [in May] helped to speed up the idea that summer is arriving; there were lots of offers around,” a producer source said
The uncertainty over when exactly prices will bottom out, and how quickly, has also affected the amount of fixed price business concluded, sources told Metal Bulletin.
“People are looking at the formula route given prices are going down, but sellers don’t want exposure to the rest of June’s fluctuations,” the second trader said.
“It’s an unknown time. The market is correcting itself,” a fourth trader said.
Despite prices falling, market participants remain generally upbeat that prices will stabilize before losing too much of their gains from the past 18 months.
“The downtrend has started so sentiment is not good, but the supply-demand balance is still tight and customers are declaring maximum volumes on their long-term agreements,” a trader source in Asia said.
While isolated offers were reported at lower levels last week, small sales were still achievable above $44 in some cases.
“Sentiment is not good but demand is healthy and broken cathode is very tight in particular,” the trader in Asia added.
“Overall the market is still bullish; $38-39 per lb seems to be the interesting number to people for restocking,” the fourth trader said.
Indeed, market participants were not hugely bearish last week, despite the recent change in sentiment, with bids at $41.50 per lb not uniformly accepted, and fewer offers seen week-on-week.
“The unsolicited offers are gone - I haven’t really had any this week,” the first consumer said.
“You never know what might happen at the end of the quarter; people could be squaring their books and then there’s more cash around from July,” a final trader added.