Europe's cobalt metal market has diverged in recent weeks with higher prices achieved for material going to the aerospace and superalloy industries, while chemical-grade metal bound for the battery industry came under pressure from low Chinese demand.
Prices for alloy-grade cobalt metal were assessed at $17.40-18.75/lb du Rotterdam on 9 March, a steep $1.43/lb premium to chemical-grade metal at $16-17.25/lb du Rotterdam. The spread between these two grades stood at just 30¢/lb on 6 February.
Low Chinese demand for chemical-grade metal — which is used to dissolve into cobalt salts such as sulphate and tetroxide — has weighed on prices for this product globally. Briquettes that were purchased by China's chemical refineries last year are being sold back to the international market because requirements have been scaled down.
"There's an interesting imbalance in the market with the chemical grade against the alloy grade," a trader said. "Briquette producers are suffering too. China is not buying their metal, so they are coming to the international market."
Exacerbating the split is high demand for alloy-grade metal as commercial aerospace production ramps up, looking to serve a stronger than expected recovery in aircraft demand. In February, European aerospace manufacturer Airbus said demand for its products was outpacing supply.
The International Air Transport Association (IATA) noted earlier this week that global air travel had returned to 84.2pc of January 2019 levels, and was 67pc higher compared with January 2022.
"Air travel demand is off to a very healthy start in 2023. The rapid removal of Covid-19 restrictions for Chinese domestic and international travel bodes well for the continued strong industry recovery from the pandemic throughout the year. And, importantly, we have not seen the many economic and geopolitical uncertainties of the day dampening demand for travel," IATA director-general Willie Walsh said.
Cobalt traders have corroborated this trend, noting high demand and tight availability for certain grades of cobalt metal — mainly cut cathodes and rounds.
"You can't buy 50t in this market. Everybody is sitting on what they have," a UK-based trader said. Another trader sold 2t of cut cathode material at $18.75/lb on 9 March — a relatively small volume and underscoring the higher prices achievable for cut cathodes this week.
There is a regional split in the market as well, with US prices higher than in Europe because the country's aerospace sector can only use three producers of cut cathodes and rounds — all of which are outside China. Prices for cobalt metal in the US were last assessed at $18.50-19.50/lb fob warehouse on 7 March, and the midpoint has not fallen below $18.75/lb since January 2021. Chinese cobalt is subject to a 25pc tariff introduced by the US in 2019.
Most manufacturers of aerospace parts and engines will not allow Chinese cobalt in their supply chains, leaving them reliant on a small number of producers. The shunning of Russian producer Norilsk's cut cathode material by many western companies because of Russia's invasion of Ukraine has added to supply tightness.
Most market participants, while agreeing that there is a surplus of overall cobalt units this year, also predict a shortage of alloy-grade metal in the second half of the year.
