COBALT MONTHLY REVIEW – MAY: Benchmark price starts retreat on slow consumer demand, profit-taking; cobalt hydroxide payables under pressure
After briefly stabilizing at a recent high of $16.35-17.05 per lb following a rise since late March, the standard-grade cobalt benchmark price started to retreat in mid-May amid slowing consumer demand and sellers’ profit-taking.
Fastmarkets’ standard-grade metal benchmark price fell 4.5% to $15.35-16.10 per lb on May 29, following several mild drops at the beginning of May after some suppliers cut offers to secure large-tonnages inquiries ahead of the traditional summer lull.
A recent tender in Europe attracted aggressive offers from sellers competing with wide discounts on long-term contracts, which in return weighed on the spot market.
In addition, sellers who had secured units when the metal price started to rise at the end of March are looking to do some profit-taking, with prices expected to weaken further toward the summer months.
In China, Fastmarkets’ cobalt sulfate price hit a fresh low for 2019 due to persistent weak demand from consumers who had either stockpiled enough material at the beginning of April - when the battery materials price was embraced with brief momentum - or largely fed on tolled products with cheap cobalt raw materials purchased at the beginning of this year.
As a result, Chinese refineries have mostly struggled to break even and, therefore, made lower bids for cobalt-hydroxide payables against a relative stronger metal price.
Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China, dropped to 63-65% against the standard-grade cobalt low-end price on May 31, from this year’s high at 67-69% in April and early May.
Belgium-headquartered battery materials producer Umicore entered the spotlight in late May after it acquired Freeport Cobalt’s cobalt refining and cathode precursor business at the Kokkola refinery in Finland for $150 million, followed by an agreement with Glencore to lock in a long-term cobalt hydroxide supply contract.
Just a few days earlier, Glencore also signed a cobalt feedstock supply contract with the First Cobalt refinery in Ontario, Canada, in addition to a financial deal to North America’s only primary cobalt refinery.
Both cobalt hydroxide agreements, which somewhat reassured an oversupplied cobalt market, also indicated cobalt hydroxide suppliers’ strong intention to secure a confirmed outlet for their units and diversify their customer base outside China.
Glencore produced 10,900 tonnes of cobalt in the first quarter of 2019, up 56% from 7,000 tonnes during the corresponding period last year and nailed the total cobalt production target at 53,000-61,000 tonnes in 2019, compared to the actual output at 42,200 tonnes in 2018.
The other big news in May was the United States’ import tariff hike on Chinese minor metals, including cobalt, however, market participants mostly downplayed the impact on Chinese blue metal exporters who had already been downsizing exports to the US when waiting for the tariff to increase from 10%, which started in September 2018, to 25%.
The benchmark cobalt metal price is likely to oscillate either side of $15 per lb in the next few months, Fastmarkets was told on the sidelines of the annual Cobalt Institute gathering in mid-May.
Conference delegates expect the metal price to fall over the summer despite some slightly tight supply dynamics, while buyers identified a price of $13-15 per lb as an appealing opportunity to restock, which might incite a rebound – similar to the end of March - though the extent of the rebound is likely to be limited due to a surplus in the cobalt hydroxide market.
“The return to weaker prices fits our fundamental outlook where the ramp up in the Democratic Republic of the Congo (DRC) pushes the market into a supply surplus, although most of that will show up in cobalt hydroxide and not metal,” an analyst from Fastmarkets battery materials research team said.
Increased hydroxide supply over the past year has meant diverging fundamentals between cobalt intermediates and cobalt metal, creating conversations about changes in the way cobalt hydroxide contracts are structured going forward.
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.