Supply issues mean China’s cobalt metal prices continue to rise
China’s cobalt metal prices have been rising ever since the end of the Lunar New Year holiday and could go even higher because of limited availability in the spot market
Fastmarkets’ price assessment for cobalt 99.8% Co min, ex-works China was at 528,000-538,000 yuan ($83,177-84,752) per tonne on Wednesday February 16, up by 10,000-15,000 yuan per tonne from 513,000-528,000 yuan per tonne a week earlier.
The current assessment price is up by 23,000-28,000 yuan per tonne from 500,000-515,000 yuan per tonne on January 21, which was the last assessment before the Lunar New Year.
Current monthly consumption of cobalt metal is approximately 800-1,000 tonnes in China. Although the demand is not robust, it is also stable, according to multiple market participants.
But sources also said that while current spot market inventories of cobalt metal in China stood at 700-800 tonnes, monthly production being made available to the spot market was only 300 tonnes. So without additional supplies, spot market inventories will only last for about a month based on the current consumption rate.
“The recent gains in China’s cobalt metal prices were due to the low supplies in China, because there are few cobalt producers still producing cobalt metal in today’s market. Considering the current level of demand, spot market inventories may run out at the end of March,” a cobalt trader told Fastmarkets.
Cobalt metal stocks on China’s Wuxi Stainless Steel Exchange have been hovering below 100 tonnes since January 27 and hit a two-year low of 66.75 tonnes on February 15. That was the lowest level since October 11, 2019, when stocks fell to 37 tonnes, according to the exchange’s website.
Better margins have incentivized more cobalt producers to prioritize cobalt sulfate production over cobalt metal, amid limited supplies of cobalt hydroxide, and this has led to a nationwide reduction in the production of cobalt metal, several market participants said.
Since the start of 2021, a number of major producers have channeled more of their feedstock toward producing cobalt salts.
In November, a major cobalt producer cut its cobalt metal production to just the amount required to fulfill long-term contract deliveries. Then, at the end of January, another major Chinese producer cut its cobalt metal production to about two-thirds capacity to prioritize cobalt sulfate production.
Amid the widespread shortage of cobalt metal, downstream consumers from industrial sectors could now have to start considering alternatives for their production, market participants said.
“Those cobalt metal consumers from industrial sectors may have to use scrap or cobalt salts as alternatives for their production, should supplies of cobalt metal in the spot market really run out,” the cobalt trader said,
A second cobalt trader described that approach as “just a quick fix and not a long-term solution” to the problem.
“The only hope is for cobalt metal prices to rise so much that producers are attracted to ramping up cobalt metal production [to benefit from] improved margins,” he said.
The first cobalt trader added that, with about 2,000 tonnes of cobalt briquettes in Chinese bonded warehouses, if cobalt metal prices do rise to a very high level, then sellers might be inclined to move those units out and sell them in the domestic market.