Battery Materials: Cobalt Conundrum Continues In September

According to Susan Zou at MetalBulletinAsia.com, cobalt metal prices stabilized in late August with cobalt sulfate remaining under pressure.  According to the chart below, cobalt metal and cobalt sulfate prices are down 21.8% and 24.8% respectively.  Both cobalt products remain up over a 12 month period with gains of 17.5% and 16.7%.
Cobalt 27 Capital  (OTC:CBLLF), the Canadian cobalt investment and streaming company, has been rocked by price volatility and other challenges.  Cobalt 27 reported the theft of 76 metric tons of cobalt from a warehouse in Rotterdam in early July, part of a total of 112 metric tons stolen from Cobalt 27 and others. Cobalt 27, which has stockpiled 2,982 metric tons worth nearly $200M at current prices, says its stocks, says the stolen cobalt is worth ~$5M and was fully insured at market prices.  Cobalt 27 Capital had its price target decreased by equities researchers at Canaccord Genuity from C$22.50 to C$15.50 in a research note issued on September 6.  Given the price sits at C$5.30 at the time of this report, Canaccord Genuity’s target price suggests a potential upside of almost 300%.  The Editor believes that Cobalt 27 is vastly oversold at current price levels.
Metal Bulletin average cobalt, cobalt tetroxide prices
The MetalBulletin summary below provides good input about market sentiment and direction.
Price moves:
Aggressive summer selling continued into August and pushed Metal Bulletin’s low-grade cobalt price down to an eight-month low. But a resumption of buying interest sent out a signal that the blue metal price is close to bottom out.Notably, low-grade cobalt began to trade at a premium against high-grade material due to limited supply of low-grade briquettes and broken cathodes which are favored by consumers serving the booming battery sector.Meanwhile, persistent Chinese selling on an open export arbitrage window has resulted in increasing competition among suppliers, granting buyers an upper hand in negotiations.

A combination of producers’ urgency to square their books amid tight cashflowsand weak demand, and the emergence of excess scrap feed has kept cobalt sulfate prices in check, despite an anticipated turnaround in benchmark low-grade cobalt prices.

“Many small cathode producers have cut or halted production as the quality of their products does not match the requirements for batteries now needed by the auto manufacturers. This suggests there will be further consolidation in cathode producers and battery manufacturers in China,” Metal Bulletin’s battery raw materials research team said.

In addition, price weakness in cobalt tetroxide, which accounts for about 60-70% of total cobalt consumption in China, has led to concerns for the overall performance of the Chinese cobalt market.

Buying interest for cobalt tetroxide has weakened as a result of battery makers turning to tolling agreements to convert cobalt raw materials directly into cobalt tetroxide, as well as the substitution to cheaper nickel-cobalt-manganese (NCM) lithium-ion batteries. This has kept cobalt tetroxide prices under pressure.

Market news:
In early August, Cobalt Blockchain and Traxys Europe signed a letter of intent to establish a commercial partnership at Traxys’ cobalt hydroxide plant in Lubumbashi in the Democratic Republic of the Congo (DRC). Cobalt Blockchain will invest as much as $2 million into plant.

The plant has a design throughput of 50,000 tonnes per year of run-of-mine feed, with expected output of 3,150 tpy of cobalt hydroxide and 1,050 tpy of contained cobalt, assuming a minimum feed grade of 3% cobalt.

Glencore, the other mining giant who owns key cobalt assets in the DRC, has seen its first half year profit soar by 28%, receiving strong support from strong cobalt prices in the first six month of 2018, and production resumption at its Katanga mine.

Outlook:

“Cathode producers, battery manufacturers and OEMS [original equipment manufacturer], as well as electric vehicle buyers, have all had to adjust to the new subsidies, which was bound to slow activity down as production lines were changed and buying decisions delayed,” Metal Bulletin’s battery raw materials research team said.“The slowdown is expected to have led to pent-up demand so the recovery is expected to be swift, which is why we are forecasting a rebound in prices for the rest of the year. For now prices have levelled out, we wait to see if the markets start to rebound,” it said.

For the medium-term outlook, the battery raw materials research team holds its view that any surplus is likely be mainly on paper.

“We expect surplus cobalt units will be absorbed by downstream consumers – and even OEMs – while they try to secure supply in what is likely to become a very tight market within a few years,” the team added.

Susan Zou

susan.zou@metalbulletinasia.com

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