PRICING NOTICE: Proposal to launch two reference prices for the cobalt hydroxide market

Fastmarkets proposes to launch two reference prices for the cobalt hydroxide market to capture and quantify the standalone fundamentals of the cobalt intermediates market through its emerging spot trade.

Fastmarkets will launch a single-figure monthly cobalt hydroxide index, and a twice-monthly cobalt hydroxide payable indicator, both on the basis of min 30% Co, cif China.

Cobalt hydroxide, typically with 30-40% cobalt content, is a crude material produced from cobalt ores and concentrates, and is the major raw material for producing cobalt sulfate, used in battery cathodes serving the burgeoning electric vehicle sector.

In response to the emerging spot liquidity of cobalt hydroxide, and potential growth of this spot market, Fastmarkets intends to track cobalt hydroxide prices on a regular basis, offering two new reference prices to the cobalt and battery raw materials markets.

Click here for more background on the emerging spot market for cobalt hydroxide.

At the same time, the difference in cobalt content of hydroxide from different mines, varying quotation periods and payment terms, as well as differing preferences for fixed-price spot deals versus spot payable percentages, add to the complexity of price discovery for cobalt hydroxide.

Fastmarkets understands that current spot liquidity for cobalt hydroxide is still relatively limited, and the initial specifications and frequency of publication outlined below are designed to reflect the current market conditions and initial feedback.

Fastmarkets now invites additional feedback on the specifications outlined below, with a view to publishing its first cobalt hydroxide reference prices in February 2019. These specifications will be subject to initial market feedback, and later, a six-month review of the data collected, as outlined below.

Cobalt hydroxide index, min 30% Co, cif China, $ per lb
A single-figure index will capture the price of cobalt hydroxide produced from major mines each month.

Fastmarkets will collect spot offers, bids, sales and assessments for cobalt hydroxide produced by Glencore and China Molybdenum, putting this data into an in-house developed index model to calculate a single-figure reference price.

An index is a tonnage-weighted single-figure average in which the greatest weighting is given to actual spot transactions. Non-transaction data is weighted at minimum tonnage while actual transactions are given their full weighting.

With sufficient data history, material that lies outside the index’s base specification can be normalized using in-house developed coefficients. Spot price data will also be collected for material outside the base specification. This data will be analyzed to inform a six-month review of the index and its specifications, with a view to widening the base specifications as much as possible after this time.

If any spot indication is collected as a payable percentage of the Fastmarkets standard-grade cobalt price, with the payment period of the current month (ie, “M”), Fastmarkets will calculate a corresponding fixed price based on the average low-end price in Fastmarkets’ standard-grade cobalt price assessment for the current pricing month (“M”).

The base specifications for the proposed monthly cobalt hydroxide index are as follows:

Index: Cobalt hydroxide index, min 30% Co, cif China, $ per lb
Assessment type: single-figure index
Price/unit: $ per lb
Basis: cif China (other terms normalized)
Delivery window: 45 days
Base chemical spec: min 30% cobalt content
Minimum tonnage: 50 tonnes (cobalt content)
Payment terms: letter of credit (LC)
Payment window: current pricing month (ie, “M”)
Publication time: 5pm London time, last working day of the month.

Cobalt hydroxide payable indicator, min 30% Co, cif China, % payable of Fastmarkets’ standard-grade cobalt price (low-end)
In response to feedback that a significant volume of cobalt hydroxide is still agreed on the basis of a percentage of the benchmark metal price, Fastmarkets will also launch a twice-monthly cobalt hydroxide payable indicator to provide comprehensive coverage of the cobalt hydroxide market.

The base specifications for the proposed twice-monthly cobalt payable indicator are as follows:

Assessment: Cobalt hydroxide payable indicator, min 30% Co, cif China, % payable of Fastmarkets’ standard-grade cobalt price (low-end)
Assessment type: assessed range
Price/unit: % payable of Fastmarkets’ standard-grade cobalt price (low-end)
Basis: cif China (other terms normalized)
Delivery window: 45 days
Base chemical spec: min 30% cobalt content
Minimum tonnage: 50 tonnes (cobalt content)
Payment terms: LC
Payment window: current pricing month (ie, “M”)
Publication time: 3pm London time, 15th and last working days of the month. Where the 15th falls on a weekend or a public holiday in England and Wales, the assessment will be published on the closest working day preceding that date.

The consultation period for the above proposal will end 30 days from the date of this pricing notice, on February 28, with the first index and payable indicator being published on February 28.

Fastmarkets’ index methodology screens outliers and applies a quantity weighted model to ensure that the index is the most robust in the industry.

Fastmarkets has no financial interest in the level or direction of the index or payable indicator.

In the context of growing scrutiny of the cobalt supply chain, please note that Fastmarkets and Euromoney plc are committed to observing the Modern Slavery Act.

To provide feedback on this matter, or if you would like to provide price information by becoming a data submitter to Fastmarkets’ cobalt prices, please contact Charlotte Radford or Susan Zou by email at: pricing@fastmarkets.com. Please add the subject heading FAO: Charlotte Radford/Susan Zou, re: Cobalt hydroxide prices.

To see all Fastmarkets’ pricing methodology and specification documents, please go to https://www.metalbulletin.com/prices/pricing-methodology.html.
 

Charlotte Radford

charlotte.radford@fastmarkets.com

Susan Zou

susan.zou@metalbulletinasia.com

Published

Charlotte Radford

Susan Zou

January 29, 2019

19:55 GMT

Shanghai, London