Tight cobalt availability narrows alloy grade premium over standard

The premium for alloy grade cobalt metal over standard grade narrowed in the week ended Friday April 1, with tight supply prompting some market participants to take whatever material is available

Fastmarkets’ price assessment of cobalt alloy grade, in-whs Rotterdam was at $39-39.80 per lb Friday, flat from the previous session and up from $38.70-39.65 per lb the same time last week.

Fastmarkets assessed the price of cobalt standard grade, in-whs Rotterdam was assessed at $39-39.70 per lb Friday, unchanged from the previous session but up from $38.70-39.30 per lb a fortnight ago.

There was no sustained premium for alloy grade over standard grade for most of 2022 until mid-March. Alloy grade’s premium over standard grade, on a mid-point basis, was at its widest on March 28 at $0.23 per lb before it started to narrow.

One of the catalysts for the growing premium for alloy-grade cobalt earlier in the month was the Russian invasion of Ukraine and the fears over sanctions on Russian-origin commodities.

Russian-origin cobalt, most of which is considered standard grade under Fastmarkets’ specifications, remains tradable; western sanctions have neither affected its cobalt suppliers nor officially restricted sales.

Despite the lack of official sanctions on Russian-origin material, market participants were still wary of handling it due to potential compliance risks.

More than a month after Russia’s invasion of Ukraine and the subsequent sanctions, the lack of any official sanctions on Russia-origin cobalt has made some market participants less apprehensive of trading it.

This has helped to normalize the gap between standard and alloy-grade in recent pricing sessions.

The lack of alternatives to Russian-origin material and shapes also mean that buyers are scrambling to take any material they can get.

“It could be that [the alloy grade premium] is easing over time,” a trader in Europe said. “People are not talking about [Russia] as much. Everyone is focusing on availability, everyone has a business to run. The ones who need material will take what they can get.”

In limited cases, buyers who have only certified Russian-origin material for purchase were said to have paid a premium to sellers. Expanding certification to other brands is a costly and long process, while sellers are charging a premium to buyers looking for specific brands due to high replacement costs.

“Some people have a couple of contracts where the buyer has only approved Russian cut cathodes,” a second trader said. “Approval for a new brand would take months and therefore these people are being squeezed as everyone knows that getting new Russian production would be hard for quite a while.”

While the gap has narrowed over the course of the week, there is uncertainty about the future of the trend.

Potential future sanctions also remain a concern for some in the market.

“There is no apparent concern about Russian origin for parcels already [in the US],” a fourth trader said. “I think it’s more a question of long-term availability dependent on government action.”

Demand from certain end-user segments could also drive a gap between the two cobalt grades in the future, sources said.

Market participants are bullish on cobalt demand from sectors in the West such as defense following Russia’s war. Those sectors are likely to have strict guidelines on the origin of raw materials due to their sensitivity to national security.

On a broader scale, aerospace demand should be a driver for alloy grade demand in the coming months, with travel returning after the easing of Covid-19 travel restrictions.

What to read next
Recent agreements with Japanese companies will help Nouveau Monde Graphite become the biggest graphite producer in North America’s anode supply chain, Eric Desaulniers, founder, president and chief executive officer of the company told Fastmarkets
Lithium prices in China continued to fall in the week to Thursday December 1, with market participants citing downward pressure from persistent caution among buyers and lower demand from the battery sector
Global refined nickel premiums were broadly steady in the week to Tuesday November 29, with the exception of European briquettes premiums which came under further pressure due to increased supply
The new proposal would help restore approximately 500 million gallons of blending volumes previously waived by the agency in 2016
German equipment provider SMS Group will provide a logistics and storage system for a forthcoming $238.7 million aluminium foil plant being built in the US by South Korea’s LOTTE Group to meet demand for the material’s use in electric vehicles (EVs)
Peter Hannah, senior price development manager at Fastmarkets, discusses key pricing trends in the lithium market and gives his advice for those navigating this volatile time
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.