Chinese cobalt metal rises to premium over Europe

Prices in China for electrolytic cobalt metal opened up a premium to European prices for chemical-grade cobalt metal last week on renewed demand in China for cobalt metal and chemicals.

Prices for 99.8pc grade metal in China rose to Yn280-295/kg on 8 October, equivalent to $17.77-18.72/lb. European chemical-grade cobalt prices were assessed unchanged at $17.50-18.20/lb.

Cobalt sulphate prices in China rose to Yn56,000-60,000/t on 8 October, from the previous assessment of 55,000-60,000/t.

Cobalt prices in both regions have been rising since Glencore announced it would close its Mutanda mine in the Democratic Republic of Congo (DRC) by the end of 2019. Mutanda is the largest copper-cobalt mine in the world and produced 27,300t of cobalt in 2018, around a fifth of global output.

Much of its output, like other mines in the DRC, is in the form of cobalt hydroxide, which is exported to China for conversion into metal and chemicals. Last year, China imported 137,966t of cobalt hydroxide, most of which contained 30-35pc cobalt.

Chemical demand driving the Chinese cobalt market

China's cobalt sulphate market is increasingly the driver of cobalt prices, as metal prices have been aligning closely with sulphate prices in recent years.

Metal prices have typically driven demand for the raw material cobalt hydroxide, but the market is changing as sulphates have become more prominent owing to demand for battery chemicals, to meet demand from electric vehicle producers.

Sulphate demand in China started to fall last year in response to oversupply and a drop in demand for battery materials. After falling to a low of Yn34,000-37,000/t on 16 July 2019, prices rebounded in August and September, rising to Yn53,000-58,000/t in the last assessment on 19 September. Much of this rise was in response to Glencore's Mutanda decision, which spurred buyers into action. Prices for the metal in China rose in tandem, overtaking the European market on 19 September.

Demand for cobalt chemicals in China creates demand not only for cobalt hydroxide, but also for chemical-grade metal produced in China. When sulphate prices rise, metal prices increase faster than in Europe, where there is less demand for cobalt chemicals.

Argus launched its assessment for 30pc min cobalt hydroxide today, with prices assessed at $11-12/lb cif China.