Chinese cobalt sulfate price slides amid producers' high inventories, aggressive bidding from consumers

The price of cobalt sulfate in China fell again this past week after producers surrendered to aggressive bidding by consumers in the run up to the end of the year, a time when both parties face extreme financial constraints.

Fastmarkets MB assessed the price of cobalt sulfate (Co 20.5% min) in China on an ex-works basis at 68,000-73,000 yuan ($9,776-10,495) per tonne on Wednesday November 28, down from 70,000-75,000 yuan per tonne on November 23 and reflecting the 11th consecutive decline since October 19.

The adjustment of Chinese cobalt sulfate price against Fastmarkets MB’s low-grade cobalt price at 20.5% Co basis was unchanged a discount of $2.55-2.83 per lb.

“Some producers have no choice but to agree with consumers’ lower bids because they need to square their financial books before year-end,” a producer said, adding that the majority of producers are pressured by high inventories.

Buying appetite this past week was generally weak, with most consumers buying on a “hand-to-mouth” basis, which has resulted in finished product piling up at refineries, market sources told Fastmarkets MB.

“Consumers are barely building up any stocks,” a second producer said.

In addition, the emergence of cobalt sulfate which utilizes cobalt scrap as feedstock is increasingly taking market share away from cobalt sulfate producers who traditionally use other raw materials, such as cobalt concentrate and hydroxide.

Several producers indicated they would not sell cargoes below 70,000 yuan per tonne given their production costs, including raw material procurement and processing costs.

“We are currently discussing a level – say about 68,000 yuan per tonne – that [if prices go] below we will completely stop selling,” a third producer said.

But some market participants argued that whether producers could continue to hold back from sales amid such aggressive bidding was dependent on the producers’ financial status.

“December is a special time of year [when cash is needed most]” a consumer said.

“Producers still need to check the status of their cash flow. If they need cash, they have to sell – even at persistent losses,” the second producer said.

Susan Zou

susan.zou@metalbulletinasia.com

Published

Susan Zou

November 29, 2018

06:04 GMT

Shanghai