PRICING NOTICE: Proposal to increase pricing frequency of cobalt hydroxide index cif China
Fastmarkets is proposing to increase the pricing frequency of its cobalt hydroxide index, 30% Co min, cif China to fortnightly from monthly at present.
The cobalt hydroxide index 30% Co min, cif China is currently published on the last working day of each month. It was launched in February 2019, alongside Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China, to provide transparency on the effective prices buyers were paying for cobalt raw materials.
Following an initial consultation with the market, and a review of data collected in the form of a fixed price over the course of a month, Fastmarkets now proposes to publish the index every other Friday.
An index is a tonnage-weighted single-figure average in which the greatest weighting is given to actual spot transactions. Non-transaction data is weighted at minimum tonnage while actual transactions are given their full weighting.
Fastmarkets has captured an increasing amount of market activity - deals, bids and offers - carried out with a fixed price over the past three months due to emerging supply disruptions from South Africa. Lockdown in the country incited buying appetite for nearby cargoes which are typically offered and concluded on a fixed price basis.
Furthermore, some buyers prefer a fixed price over a payable, a percentage of the cobalt standard grade, in-whs Rotterdam price with a future quotation period, so as to cut their exposure to an unknown metal price.
During times of low liquidity in the fixed-price cobalt hydroxide market, Fastmarkets previously converted deals concluded with a payable to a fixed price using the month’s average cobalt price. Under the proposed increased frequency, Fastmarkets will no longer use these conversions in the index calculation.
But data submitters may consider it appropriate to use activity in the spot payable market to inform their own assessment of the fixed price cobalt hydroxide market, and these price indications will continue to factor into the index calculation. Such price indications are weighted at minimum tonnage (50 tonnes) within the calculation.
(Note: this approach matches that taken in the assessment of the cobalt hydroxide payable indicator, namely, that Fastmarkets does not itself convert deals agreed on the basis of a fixed price into a payable. Such would require Fastmarkets reporters to make assumptions about the underlying metal prices, which is typically unknown at the point of the deal being agreed. Data submitters may use activity in the fixed-price market to inform their assessment of the payable market, which are taken into consideration.)
Fastmarkets appreciates that the vast majority of spot cobalt hydroxide market activity is negotiated on the basis of a payable. The twice-weekly cobalt hydroxide payable indicator, min 30% Co, cif China will continue to capture this activity and there is no change to its assessment frequency as part of this consultation.
The base specifications for cobalt hydroxide index are as follows with proposed new pricing frequency marked in italics.
The below specifications are also reflecting an earlier proposed amendment of chemistry specification of iron, which subject to feedback, will take place on August 5 (also in italics).
MB-CO-0020: Cobalt hydroxide index 30% Co min, cif China, $/Ib
Quality: Units produced from large-scale mining activity, with the following chemical composition: Co 30% min, Mn 6.5% max, Mg 6.5% max, S 5% max; Cd 100ppm max; Fe: 5% max; limited concentration of natural radioactivity: GB20664-2006 (suitable for customs clearance into China).
Quantity: Min 50 tonnes (cobalt content)
Location: cif China (other terms normalized)
Timing: 45 days
Payment terms: Letter of credit at sight, current price month (‘M’)
Publication time: 5pm London time, Friday, fortnightly
Note: Where pricing day falls on a public holiday in England and Wales, the index will be published on the closest working day preceding that date.
The consultation period for this proposed amendment starts from Monday July 6 and will end in 30 days on August 5.
Subject to market feedback, the first pricing session following amendment takes place on August 7, followed by pricing sessions on August 21, September 4, and so on.
All historical data relating to the assessment prior to the amendment will remain available in the pricing section of the Fastmarkets website.
To provide feedback on the cobalt hydroxide price assessments, or if you would like to provide price information by becoming a data submitter, please contact Charlotte Radford and Susan Zou by email at: email@example.com. Please add the subject heading ‘FAO: Charlotte Radford/Susan Zou re: cobalt hydroxide price assessments.’
To see all Fastmarkets’ pricing methodology and specification documents, go to https://www.fastmarkets.com/about-us/methodology.