Hanrui Cobalt benefits from higher cobalt prices in 2017; strong Q1 performance expected

Chinese cobalt powder producer Hanrui Cobalt recorded a surge in net profit in 2017, with the company benefitting from the higher prices for cobalt witnessed during the year.

Hanrui achieved a net profit of 449.4 million yuan ($70.9 million) last year, up from 66.6 million yuan in 2016, according to the company’s financial report released on Tuesday February 13.

The producer’s total revenue also increased significantly in 2017, rising by 97% year on year to 1.46 billion yuan.

Revenue from cobalt products made up the majority of this figure with 1.27 billion yuan, an increase of 107% from 2016, while revenue generated by copper products rose by 124% year on year to 196.6 million yuan.

Hanrui Cobalt attributed the strong growth in revenue and net profit mainly to the surge in cobalt prices seen last year amid growing optimism over the blue metal’s use in electronic vehicle (EV) batteries.

“[Since the start of 2017], the battery industry for electronic vehicles has developed quickly which has resulted in mounting demand for cobalt, which in turn has seen international cobalt prices move continuously higher,” the company said.

Metal Bulletin’s benchmark low-grade cobalt price averaged $26.64 per lb in 2017, more than 125% higher than the average annual price of $11.78 per lb in the year prior.

Cobalt and copper projects in the DRC
Hanrui Cobalt has completed the construction of cobalt hydroxide operation lines with a capacity of 5,000 tonnes per year of cobalt content in the Democratic Republic of the Congo (DRC), which will ultimately serve for the production of cobalt metal in the country, it said.

In February last year, Hanrui Cobalt’s application for an initial public offering (IPO) in China was approved by the China Securities Regulatory Commission, with the company’s shares first traded on the Growth Enterprise Market of the Shenzhen Stock Exchange the following month.

With the funds raised through the IPO, Hanrui Cobalt is investing in a cobalt metal refinery in the DRC, with the project’s first phase with a capacity of 2,000 tpy expected to be completed by the end of 2018. A total capacity of 5,000 tpy is planned for December 2019, according to the company’s prospectus, released early last year.

In addition, Hanrui Cobalt ramped up its copper capacity in the DRC from 5,000 tpy to 10,000 tpy in 2017.

Q1 earnings forecast
Hanrui Cobalt is forecasting a net profit of 246-260 million yuan in the first quarter of 2018, up from 49.7 million yuan in the corresponding period of last year.

The company expects much stronger results in the first quarter of this year mainly due to the completion and start up of its cobalt hydroxide production lines as well as the ramp up of its copper capacity in the DRC, it said.

“Since nickel-cobalt-manganese and nickel-cobalt-aluminium lithium-ion batteries will be the preferred choice for use in electronic vehicles, demand for cobalt will continue to push up prices, which will help improve the company’s earnings,” Cobalt Hanrui added.

Metal Bulletin’s benchmark low-grade cobalt price was at $37.75-38.90 per lb on February 9, up from $18.00-19.00 per lb a year ago. Meanwhile, Metal Bulletin’s high-grade cobalt price stood at $37.75-39 per lb on February 9, compared with a price of $18.00-18.60 per lb on February 8, 2017.

The parity on low-end price for two grades reflects the strong demand for units with chemical applications and a pronounced tightness for broken cathodes and briquettes, which are popular in the battery sector.

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