In the second quarter of 2020, total imports of cobalt raw materials totaled 16,800 tons of metal, a year-on-year decrease of 19%. Among them, the total import of cobalt ore was 0.01 million tons of metal, a 92% year-on-year decrease; the total import of cobalt wet smelting intermediate products was 15,800 tons, a year-on-year decrease of 15%; the total import of unwrought cobalt was 0.08 million tons of metal, An increase of 57% year-on-year.

Changes in the price of SMM cobalt products from May 8 to July 31, 2020

Data from SMM

After mid-June, the ratio of electrolytic cobalt to cobalt sulfate gradually tended to 1, mainly due to the gradual recovery of demand for battery materials.

SMM cobalt product price comparison from May 8th to July 31st, 2020

Data from SMM

The only factors that supported price increases from May to June this year were South Africa’s port closure in April, and domestic cobalt raw materials were tight from May to June. However, the fundamentals of smelted products in the domestic market are still oversupply, and cobalt sulfate has begun to destock that month, and fundamentals have improved. The downstream demand has not improved significantly, and the demand for 3C digital electronics has entered the off-season for purchasing, and the price increase has been small.

Since mid-July this year, factors supporting price increases have increased:

1. Cobalt raw material supply end:

The new crown epidemic in Africa is serious, and confirmed cases in mining areas have appeared one after another. Production has not been affected for the time being. Although the epidemic prevention and control in mining areas is strict and the probability of large-scale spreading outbreaks is small, the market is still worried.

At present, South Africa’s port capacity has the greatest impact. South Africa is currently the most severely affected country in Africa. The number of confirmed cases has exceeded 480,000, and the number of new diagnoses increased by 10,000 per day. It is understood that since South Africa lifted the embargo on May 1, port capacity has been slow to recover, and the earliest shipping schedule was sent out in mid-May; the port capacity from June to July was basically only 50-60% of normal capacity; according to feedback from cobalt raw material suppliers , Due to their special transportation channels, the shipping schedule of mainstream suppliers is the same as the previous period, but there is no sign of improvement. It is expected that the situation will continue at least in the next two to three months; some suppliers’ recent August shipping schedule has deteriorated, and other goods and cobalt Raw materials seize the limited capacity of South African ports.

In the second quarter of 2020, total imports of cobalt raw materials totaled 16,800 tons of metal, a year-on-year decrease of 19%. Among them, the total import of cobalt ore was 0.01 million tons of metal, a 92% year-on-year decrease; the total import of cobalt wet smelting intermediate products was 15,800 tons, a year-on-year decrease of 15%; the total import of unwrought cobalt was 0.08 million tons of metal. An increase of 57% year-on-year.

China’s cobalt raw material imports from January 2019 to August 2020

Data from SMM&Chinese Custom

The African government and industry will rectify their opponents’ grabbing ore. According to market news, since August this year, it will fully control and control the grabbing ore. The rectification period may affect the import of some cobalt raw materials in the short term, leading to tight supply. However, the annual supply of ore by hand, according to incomplete statistics, accounts for about 6%-10% of the total global supply of cobalt raw materials, which has little impact.

Therefore, domestic cobalt raw materials continue to be tight, and it will continue for at least 2-3 months in the future. According to surveys and considerations, the domestic cobalt raw material inventory is about 9,000-11,000 tons of metal tons, and the domestic cobalt raw material consumption is about 1-1.5 months, and the normal cobalt raw material maintains 2- March inventory. The epidemic has also increased the hidden costs of mining companies, making cobalt raw material suppliers reluctant to sell, with very few orders, and prices rising.

2. Smelted product supply side:

Taking cobalt sulfate as an example, China’s cobalt sulfate has basically reached a balance between supply and demand in July, and the market’s low cobalt sulfate inventory has supported the upward adjustment of cobalt sulfate suppliers.

From July 2018 to July 2020 E China Cobalt Sulfate Cumulative Balance

Data from SMM

3. Terminal demand side

3C digital terminal entered the peak of procurement and stocking in the second half of the year. For upstream cobalt salt plants and cobalt tetroxide manufacturers, demand continues to improve. However, it is understood that the inventory of cobalt raw materials in the main downstream battery factories is at least 1500-2000 metal tons, and there are still cobalt raw materials entering the port successively every month. The raw material inventory of lithium cobalt oxide manufacturers and battery factories is higher than that of upstream cobalt salts and cobalt tetroxide. Optimistic, of course, there is also a little worry about the subsequent arrival of cobalt raw materials to Hong Kong.

The ternary demand is beginning to rise, and expectations are improving in the second half of the year. Considering that the purchase of ternary materials by power battery plants is basically long-term, the current battery plants and ternary materials plants are still in stock, and there is still no significant increase in the purchase demand for upstream raw materials. Downstream orders are only gradually recovering, and the growth rate of demand is lower than that of upstream raw material prices, so prices are still difficult to transmit.

4. Macro capital inflow, purchase and storage catalysis

Recently, the domestic macroeconomic outlook has continued to improve, and more capital inflows have triggered a substantial increase in the market demand for electrolytic cobalt. However, the actual end consumption of high-temperature alloys, magnetic materials, chemical and other industries shows no signs of improvement. In addition, market rumors that the purchase and storage of electrolytic cobalt have also catalyzed the increase in cobalt prices this round, but the purchase and storage news has not yet landed, which is expected to have a small impact on the market.

In summary, due to the impact of the new crown epidemic in 2020, both supply and demand will be weak. The fundamentals of global cobalt oversupply remain unchanged, but the supply and demand situation may improve significantly. The global supply and demand of cobalt raw materials are expected to balance 17,000 tons of metal.

On the supply side, Glencore’s Mutanda copper-cobalt mine was shut down. Some new cobalt raw material projects originally scheduled to be put into operation this year may be postponed to next year. The supply of hand-held ore will also decrease in the short term. Therefore, SMM continues to lower its cobalt raw material supply forecast for this year. 155,000 tons of metal, a year-on-year decrease of 6%. On the demand side, SMM lowered its production forecasts for new energy vehicles, digital and energy storage, and the total global cobalt demand was lowered to 138,000 tons of metal.

2018-2020 global cobalt supply and demand balance

Data from SMM

Although the demand for 5G, online office, wearable electronic products, etc. has increased, the demand for lithium cobalt oxide and upstream raw materials has increased, but the production and sales of mobile phone terminals with the highest market share affected by the epidemic are expected to continue to shrink, diluting part of the impact on lithium cobalt oxide and upstream Increase in demand for cobalt raw materials. Therefore, it is not ruled out that the price of upstream raw materials will increase too much, which may cause delays in downstream stocking plans. Therefore, from the perspective of cobalt supply and demand, the price increase of cobalt in the second half of the year is limited, and the price of electrolytic cobalt may fluctuate between 23-32 million yuan/ton.