COBALT MONTHLY REVIEW – NOVEMBER: International metal prices weaken from mid-month; China under pressure

Benchmark international cobalt metal prices were flat throughout the first half of November, after which year-end sales pressure began to weigh and pushed prices down as the month progressed.

Cobalt sulfate prices in China experienced similar pressure during the month, with producers in the country giving in to lower offers from buyers due to financial constraints.

cobalt metal, cobalt sulfate, cobalt prices

Price moves
Benchmark international cobalt metal prices maintained a steady range in the first half of last month.

Limited spot demand was matched by little urgency to sell, though sellers in Europe and the United States acknowledged weakness in the market for 2019, including aggressive discounts being negotiated for next year’s metal supply agreements and concerns over substantial increases in hydroxide output from the Democratic Republic of the Congo (DRC).

Traders eyed opportunities to stock up with material for shipment from China, with prices looking appealing on paper, but risky in fact given a bearish outlook overall and expected exposure to prevailing weaker prices once shipping times are taken into account.

But Rotterdam metal prices started to come under pressure in the second half of the month, after some participants began to sell, anticipating a more concerted effort to destock in December.

The tightness of broken cathode in comparison to cut cathode again made itself evident while November came to a close.

Low-grade prices – which broadly incorporate broken cathode and briquette – fell by 4.5% in the second half of November, while high-grade prices fell by 5.1%.

Similarly in China, cobalt sulfate producers continued to surrender to buyers’ aggressive bids due to high inventories and the necessity to square their financial books in the run-up to the end of the year.

Producers’ attempts to hold back from making offers over the past few weeks had helped to curb the decline in prices during Fastmarkets MB’s final pricing session in November, but some participants said they expected the traditional year-end cash flow constraints to keep Chinese cobalt sulfate prices under pressure throughout December.

The cobalt metal price in China, meanwhile, fell by 12.5% month on month in Fastmarkets MB’s final pricing session in November, tracking the weakness seen in futures on the Wuxi Stainless Steel Exchange. At the same time, the Chinese market has witnessed a shrinking of market share for traditional mainstream brands since the start of the fourth quarter due to their higher quotations compared with those for other emerging brands.

Market news
Market focus during November was undoubtedly on annual cobalt metal and hydroxide supply negotiations.

In a departure from their usual means of cobalt raw material procurement, Chinese buyers have shown reluctance in committing to any long-term contracts after witnessing aggressive production ramp-up on the mining side.

Instead, these buyers are increasingly turning to the spot market for their needs and have called for major miners to allocate more material to the spot market to provide an alternative sales mechanism to long-term contracts.

Although rising availability of cobalt hydroxide has resulted in long-term supply contracts for 2019 being heavily weighted toward lower payables year on year, the effect of a potential hydroxide surplus on the cobalt metal market next year remains unclear.

In other news, Glencore has suspended the export and sale of cobalt from its Katanga mine in the DRC after finding excessive levels of uranium in the cobalt hydroxide produced there.

As a direct result of the export and sales suspension at Katanga mine, Glencore has revised downward by 8,000 tonnes its forecast for cobalt production in 2019 from this mine.

Despite the halt of exports and sales of Katanga’s units, which could result in some short-term tightness, bearish sentiment continues to pervade the cobalt market.

“There is considerable confusion over whether, or how much cobalt will be exported from Katanga and judging by the price weakness for metal and the payable for intermediates, the market seems unconcerned about supply from Katanga – if the supply disruption does last then that could mean the market finds itself wrong-footed at some stage in the first half [of next year],” Will Adams, the head of FastMarkets MB’s battery raw materials research team, said.

“The benchmark cobalt price experienced accelerated declines by the end of November. The weak market is expected to continue in December and the first quarter of 2019 owing to the global increase in cobalt hydroxide production and its bearish impact on metal demand,” Vicky Zhao from FastMarkets MB’s battery raw materials research team said.

“Most Chinese cathode producers are monitoring the market and battery producers have finished their procurement for this year given the price falls,” Zhao said. She added that the first quarter is typically a slow season for Chinese electric vehicle (EV) production due to the Chinese New Year holiday and the annual announcement of a new EV subsidy policy in the country – ahead of which, producers tend to take a wait-and-see stance until the details of the subsidy become clear.

In light of feedback received as part of the consultation on its international cobalt price specifications, Fastmarkets MB will change the names of its benchmark in-warehouse Rotterdam assessments from January 2019. Click here for details.