Cobalt prices rose in global markets today despite most market participants indicating an export ban on cobalt from the Democratic Republic of Congo (DRC) has not immediately addressed fundamental oversupply issues.
Argus-assessed prices for Chinese-origin cobalt metal rose for the first time since launching last October today as the market absorbed the initial impact of the news.
Prices for Chinese-origin cobalt metal in warehouse Rotterdam surged today to $11-12/lb from $9.50-10.50/lb on 4 March after the DRC's four-month export ban last Monday prompted a flurry of trading activity.
Prices for non-Chinese chemical grade held at $11-12/lb. One bid for a truckload of metal was verified at $11.85/lb, while a small volume deal was also verified outside Argus' range, netting back at $9.90/lb.
Prices for alloy grade metal held at $13.50-14.50/lb, despite 1t verified at $15.50/lb, on more muted trading activity.
Other traders received offers, but no deals. They said no "reasonable offer" was heard, quoting offers for ex-Shanghai metal at $12/lb.
One major mining company is understood to have declared force majeure, according to several market participants, but there was no confirmation by the time Argus went to press.
"They are just one of the companies that had maintained a lot of long-term contracts without much stock, just working stock, so they're probably one of the first to be affected," a trader said.
Distribution of stocks unclear
Despite the activity, some market participants indicated stocks of metal in US and European ports are plentiful and at least one trading company has committed to accumulating metal in anticipation of tighter stocks as time goes on. Traders said cobalt hydroxide stocks were high outside the DRC.
"I'm fairly sure there's probably at least 60,000t of stock outside the DRC, whether it's all unsold or not I don't know," one trader said, while another reported stocks closer to 100,000t.
"I can tell you there's no shortage of cobalt," a third trader said.
The consequent rally in prices is "not driven by fundamentals", they added. "This is the worst decision for everybody: [DRC state-owned body] Gecamines gets no revenue, producers don't know where they stand for four months, and carmakers are looking to take cobalt out of batteries."
Electric vehicle producers have increasingly looked to replace cobalt given its inherent uncertainty, even ahead of the export ban. Mining uniquely concentrated in the DRC, while refining is focused in China predominantly.
Policy uncertainty looms
Market participants speculated as to whether an export quota may follow the current ban, although a move like that would be unprecedented for the DRC in recent years.
"It's just difficult to plan. Let's say they introduce 70pc quotas afterwards. Should I continue producing today? Anything I produce over the next four months not deemed part of my normal production won't be able to export after four months. You can't make investment decisions on this basis," one said.
The lack of a ban on mined production in the DRC is likely to add pressure to remove export restrictions of any kind, one trader said. The DRC could follow the example of Indonesia which has — according to some reports — put some restrictions on the mining of nickel ore. So far, there has been no official indication of quotas from official government sources, but traders and producers have expressed concerns.
Argus' cobalt assessments in China also rose sharply on 5 March. Prices for metal ex-works China rose to Yn185-205/kg from Yn160-185/kg on 4 March and Yn150-175/kg on 20 February.
And prices for hydroxide cif China, which tends to be less volatile than metal, jumped for the first time since the ban this week to $6.10-6.30/lb from $5.65-5.80/lb on 27 February.
