Tight feedstock supply, higher demand boost Co prices

Chinese and European cobalt prices have strengthened this month in response to tight feedstock supplies and expectations of higher long-term demand from the downstream sectors, mainly from power and consumer electronics batteries, according to market participants.

Argus last assessed European prices for cobalt metal at $23.80-24.50/lb for both chemical and alloy grade metal yesterday, up from $15.75-16.50/lb on 5 January, the first assessment of this year. Chinese prices for 99.8pc grade metal were assessed at 350-370 yuan/kg ($54-57/kg) ex-works yesterday, the highest level since December 2018, up from Yn265-280/kg on 5 January.

China's imports of cobalt feedstocks declined in 2020 following a shortage in supplies from uncertainty in main production hubs outside of China during the Covid-19 pandemic. Covid-19 lockdowns in South Africa, which is home to the main export ports of cobalt feedstocks, has tightened supplies since January. The country reported 1.5mn Covid-19 cases as of 23 February.

Prices of cobalt hydroxide increased sharply on a recovery in activity after Chinese buyers retuned to the market after the lunar new year holiday in 11-17 February, with the range assessed higher at $19-21/lb cif China yesterday, up from $12.50-13.20/lb on 5 January.

Demand from the power battery and consumer electronics battery sectors in and outside of China are expected to continue to grow this year, supported by national government's stimulus policies and expansion plans across carmakers.

China's state council has announced a development plan for the new energy vehicle (NEV) industry during 2021-35, targeting a 20pc share of NEVs in the country's total vehicles sales by 2035. Major Chinese carmakers have raised their electric vehicle sales guidance for 2021-25.

Power battery producers have been placing orders to secure sufficient feedstock supplies for the first half of this year on expectations of higher demand for their products. Prices of 20pc grade sulphate led gains in other cobalt salts because of stronger demand, with the latest assessment of Yn90,000-100,000/t ex-works yesterday hitting the highest level since August 2018, up from Yn77,000-81,000/t ex-works on 18 February.

Rising applications in the fifth generation industry (5G), including batteries in base stations and greater use of 5G phones, are forecast to consume a significant amount of cobalt material.

The range for 73pc grade cobalt tetroxide, a main feedstock to make consumer electronics batteries, was assessed at Yn300-320/kg ex-works yesterday, up from Yn280-290/kg ex-works on 18 February.

The uptick in the spot market has also shored up sentiment in the futures market. Prices of cobalt metal exceeded $50,000/t on the London Metal Exchange this week, and is expected to attract further interest from the financial community. February cobalt contracts on China's Wuxi stainless steel exchange closed at Yn399.50/kg today, up from Yn280.50/kg on 4 January.