Low demand, oversupply weigh on cobalt market | European Battery Raw Materials 2023

The combination of slow demand and oversupply has been putting pressure on the price for cobalt, with part of that pressure coming from the changing preference in battery chemistry toward lithium-iron-phosphate (LFP) batteries and away from nickel-cobalt-manganese (NCM) batteries

These factors were likely to be among the key talking points for cobalt industry participants ahead of Fastmarkets’ European Battery Raw Materials (BRM) Conference 2023, to be held in Amsterdam, Netherlands, on September 18-20.

Many traders have told Fastmarkets that buying activity has been slower than usual in September even though consumers were coming back to the market after the summer holidays.

“Demand for our product is going down, and I’m not optimistic at the moment. It’s difficult to sell products, and sentiment is bad,” a consumer said.

“Last year, we had a lot of problems with energy costs, but we still saw good demand from customers – it was just the production problem. This year, the demand from customers is not really there. We are running at full capacity but there is no demand,” the same source added.

“As we enter September, there is still hesitation,” a European trader said. “When people come to buy, we are seeing inquiries here and there, and demand is slowly picking up, but this is regular business for small quantities. Business is a lot slower than usual in September; it is not above average.”

Current market sentiment was similar to what was seen before the Cobalt Congress 2023, with a weak global economy in which many countries were still trying to recover from the rising cost of living that has continued to put pressure on cobalt prices.

“People are not buying new phones, or new cars,” another trader based in Europe said. “Our cobalt customers are not buying because it costs them 9% interest on stocking. We don’t expect this to change for a while.”

LFP market share growth

The growing LFP share of the battery market has also contributed to the weaker demand from cobalt consumers.

NCM batteries remained dominant in the passenger vehicle space in the electric vehicle (EV) sector, where cobalt was one of the key materials needed to stabilize the NCM battery.

But the market share taken by LFP batteries was growing and it would soon become the most popular chemistry globally, according to Fastmarkets battery raw materials analyst Phoebe O’Hara.

According to Fastmarkets’ research, the NCM battery market shares by region in the first three quarters of 2023 were US 7%, Europe 9%, China 46%.

Looking 10 years ahead, Fastmarkets forecasts the corresponding market shares for NCM in the first three quarters of 2033 to be US 18%, Europe 33%, China 44%.

The majority of LFP batteries were currently used in China, but the affordability of EVs with LFP batteries has become more appealing to consumers and it was gradually becoming more popular in Europe and North America.

This added extra pressure to the weaker demand for cobalt, because there will be fewer NCM batteries used – unlike views taken by forecasts in the past. In addition, some original equipment manufacturers (OEMs) were trying to use less cobalt in their NCM batteries, with a component ratio of NCM 811, rather than NCM 622 or NCM 111.

Low cobalt price attractive to investors

After mid-May this year, however, there was demand for cobalt from investors and traders because the low price made it attractive for investment purposes.

“Investors are not buying at the moment,” the second European trader said. “We are seeing some units coming out here and there from investors who are letting go of their units.”

The same trader expected to see more investor interest, similar to earlier in the year, at historical low prices, with investors looking to diversify their portfolios away from traditional energy commodities toward energy transition commodities such as cobalt.

Some market participants expected that the stockpiling by China’s State Reserve Bureau (SRB) would help to ease the pressure on cobalt prices.

“The Chinese economy is weak, but it is offset by relatively stable US and Western markets,” a North American trader said. “Buying among consumers is slow but the SRB stockpiling should help to support cobalt prices, by offsetting the oversupply of cobalt.”

Fastmarkets’ daily price assessment for cobalt, standard grade, in-whs Rotterdam, was $13.50-14.75 per lb on September 14, compared with $16.30-18.50 per lb on July 19, when the price was at the height of its recovery from the historical low of $13.30-14.10 per lb on May 23.

But the alloy grade market remained at a premium to standard grade, due to the stronger superalloy market in the US, where there is limited availability of materials that the superalloy sector can take.

Some traders based in the US have told Fastmarkets that they were not able to participate in the alloy-grade market because they did not have materials to trade.

Fastmarkets’ daily price assessment for cobalt, alloy grade, in-whs Rotterdam, was $15.50-16.50 per lb on September 14, down compared with $18.30-19.80 on July 18, when the price was at the height of its recovery from the historical low of $13.80-15.30 per lb on May 30.

“A lot of our superalloy-grade consumer demand is for forward delivery,” a third trader said.

Cobalt oversupply raised concerns

Meanwhile, the oversupply of cobalt remained a concern for market participants, especially after mining company China Molybdenum (CMOC) reached a consensus on royalties with state-owned miner Gécamines in Democratic Republic of Congo (DRC), which were at the root of a dispute that led to an export ban.

Market participants told Fastmarkets that logistics were still subject to disruption from DRC to the Port of Durban in South Africa, and that CMOC has only been able to ship out materials in small increments.

“The company is putting priority on getting materials out for customers with long-term contracts, to fill orders that could not be transported while the export ban was in place,” a market participant said.

“Since exports resumed in May, transport of the products has been going smoothly,” CMOC vice-president Zhou Jun said on September 6. “We expect to de-stock by the end of the month, when around 240,000 tonnes of copper will be transported.

“In addition,” he said, “the first batch of copper and cobalt products exported to China from the company’s KFM copper and cobalt mine in the DRC will also arrive at Ningbo Port in the near future.”

There was no mention of a specific volume of cobalt, however.

A source close to the matter told Fastmarkets that cobalt hydroxide from the DRC would be shipped in the second half of this month.

The depressed prices for cobalt sulfate and hydroxide have forced chemical producers to convert these into metal for a small profit, adding extra pressure on cobalt metal prices, market participants told Fastmarkets.

Fastmarkets’ twice-weekly assessment of the cobalt hydroxide payable indicator, min 30% Co, cif China, % payable of Fastmarkets’ standard-grade cobalt price (low-end), was 55-60% on September 13.

And the daily price assessment for cobalt hydroxide, 30% Co min, cif China, was $7.30-7.60 per lb on September 14.

“There is no demand for cobalt sulfate, and the cobalt hydroxide price is low. Chinese chemical producers are converting these into metal,” a producer source said.

In addition to chemicals being converted into metal, there was additional metal production by Chinese cobalt producer Hanrui.

“Hanrui has started [cobalt] metal production and it can easily deliver to China’s SRB for its plan to stockpile a large volume of cobalt metal,” the same source said.

Fastmarkets’ analysts forecast cobalt surpluses of 7,000 tonnes in 2023 and 14,000 tonnes in 2024.

Learn more about Fastmarkets’ cobalt long-term forecast

The Fastmarkets NewGen cobalt long-term forecast leverages our heritage in providing price data and market intelligence in the cobalt market. These insights are paired with expert economic modeling and data to provide market participants and investors with unmatched clarity on how the cobalt market will evolve in the next 10 years.
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