Cobalt prices fall on easing supply, stable demand

European cobalt prices have fallen since mid-March amid an anticipated easing of supply bottlenecks and stabilising demand from the battery chemical industry.

Rotterdam prices for alloy grade cobalt metal were assessed at $22.50-23.80/lb yesterday, down from $24.50-25.20/lb on 1 April. Prices for chemical grade metal were assessed down at $22.80-24.15/lb from $24.80-25.40/lb over the same period, maintaining a slight premium to alloy grade metal.

Some traders saw the Easter holiday period as a good time to draw down positions and take profits on a first quarter that saw cobalt prices rise by more than 57pc. One trader still achieved a sale at $24.15/lb earlier this week and some have maintained offers above $24/lb, but most bids, offers and deals are now hovering in a range of $22.50-24/lb across both grades.

The market has "found the floor", a trader said, confident that another round of purchasing would probably push prices back up. "We have transitioned from seller to buyer this week," he said.

Seaborne prices for cobalt hydroxide — which underpinned the first-quarter metal price hikes — have drifted down in the past three weeks, last assessed at $22-23.10/lb cif China on 6 April, down by 4pc from $22.80-24.20/lb cif on 16 March. Some Chinese cobalt smelters have reduced their operating rates in recent weeks amid flat demand for metal and relatively high hydroxide prices. Chemical producers that convert hydroxide resisted higher prices, having reduced their own offer prices to attract sales.

Supply bottlenecks easing

Market participants said they expect bottlenecks along cobalt supply routes to ease this quarter. High shipping costs, busy, socially-distanced ports in Africa and haulage issues at borders have caused sporadic delays over the past year for hydroxide producers.

Large producers in the Democratic Republic of Congo (DRC) said they saw no further issues shipping to China, although they admitted some smaller producers may have more trouble because of lower-tier relationships with shipping lines. Traders moving material from DRC said ships that rushed to Asia to take advantage of higher freight rates are likely to be more evenly distributed in the second quarter. Frenzied demand for shipping out of Asia led to higher ship purchases in the first quarter.

New and old cobalt suppliers have entered the market in recent weeks. Sumitomo's Ambatovy announced a return to operations last week after a full year's suspension on 26 March 2020. Ambatovy has a nameplate cobalt metal capacity of 5,600 t/yr, producing briquettes for the chemical market. In mid-March, Wanbao Mining in DRC produced its first cobalt hydroxide. It aims to ramp up hydroxide output to 5,000 t/yr. Additionally, cobalt that was shipped during the tight early first quarter is now arriving at Chinese ports, easing the flow of hydroxide to chemical producers.

Sustained long-term demand

The beginning of the second quarter has seen demand from Asia's chemical producers stabilise, although market participants expect a further round of purchasing to lift the market in May.

China's electric vehicle (EV) market has continued to grow. March EV sales totalled 226,000 vehicles, up by 240pc on March 2020 and by 105.5pc from a month earlier, according to CAAM. Battery vehicle sales were up in the UK year on year by 88.2pc to 22,003, up from 11,694 previously, according to the SMMT. The EU has yet to report March registration figures, but the trend in the UK is expected to continue in Europe. The long-term demand outlook in the US looks more secure too, as the administration of President Joe Biden invests in the US EV market.

A gradual shift away from cobalt by Chinese EV makers could be a limiting factor to rising demand. China's second-largest battery producer yesterday committed to non-cobalt blade batteries. Blade batteries use lithium-ion-phosphate (LFP) cathode technology. Others, such as CATL — China's largest battery maker — have also been drifting towards LFP technology for their mass market batteries, although these are mainly used in shorter-range vehicles.

By Thomas Kavanagh