Chinese cobalt sulfate price continues to tumble; producers stop offering to avoid losses

The price of cobalt sulfate in China continued to fall this week amid slow trades and aggressive buyer bidding.

At the same time, a number of producers told Fastmarkets that they have stopped offering material into the market because prices are below levels at which they can make a profit.

Fastmarkets assessed the price of cobalt sulfate (Co 20.5% min) in China on an ex-works basis at 74,000-78,000 yuan ($10,666-11,242) per tonne on Wednesday November 21, down 2.6% from 76,000-80,000 yuan per tonne on November 16. Meanwhile, its adjustment to the low-grade cobalt low-end price came to a discount of $2.43-2.66 per lb, from $2.37-2.60 per lb previously.

The discount of the Chinese cobalt sulfate price against the low-grade cobalt low-end price at 20.5% Co basis has widened significantly since mid-October, indicating a threat to the profit margins of cobalt sulfate producers. The discount surpassed the $2-per-lb mark in the second half of October and has remained above this level since.

As a result, some producers have told Fastmarkets that they intend to stop offering cobalt sulfate into the market to avoid making any losses, which stem primarily from high import costs for cobalt raw materials.

“We barely made any offers this week because spot prices edged lower so quickly,” a producer said. “We also didn’t want to respond to inquires either because we know they probably won’t take our offer prices, or [they would] bid aggressively lower.”

Some bids reported to Fastmarkets were as low as 70,000 yuan per tonne midweek.

“If international cobalt metal prices remain steady, major domestic Chinese cobalt sulfate producers intend to hold their offer prices intact,” a second producer said.

Fastmarkets’ low-grade cobalt price, which traditionally serves as a basis for Chinese producers to calculate cobalt raw materials import costs, has remained little changed with a slight downward bias since mid-September – until early this week that is. The benchmark price was recently assessed at $33.25-33.95 per lb on November 21, after the low-end of the range had remained at $33.50 per lb since September 19.

“There would be limited room for cobalt sulfate prices to fall further if spot prices crawl lower than the raw material import costs,” a third producer said.

“Whether the cobalt sulfate price will continue to drop is dependent on whether producers can purchase cobalt raw materials at the same level at which they sell their finished products in the spot market,” a fourth producer said.

Other participants said they expect spot cobalt sulfate prices in China to edge toward or below 70,000 yuan per tonne in the near term due to weak demand and tighter cash flows in the run-up to the end of the year.

“Some producers are likely to surrender to consumers’ aggressive bids. After all, it is the end of year –when [producers] need to complete sales targets and pay back credit facilities,” a second trader said.

Susan Zou

susan.zou@metalbulletinasia.com

Published

Susan Zou

November 22, 2018

11:00 GMT

Shanghai