BATTERY MATERIALS CONF: Cobalt stockpiling drives recent spot buying; price vulnerable to backswing

The uptick in cobalt metal spot buying in the past two to three weeks has been attributed to stockpiling rather than consumption, delegates heard at Fastmarkets’ Battery Materials Conference in Shanghai last week.

The stockpiling was prompted by an expectation that the price will have an apparent and sustainable rebound in two to three years, Tony Southgate from Stratton Metals said during a panel discussion on Friday April 12.

The international cobalt benchmark price rebounded for the first time in five months at the end of March, and the momentum continued into April.

Fastmarkets’ standard-grade cobalt price rose to $15.35-16.75 per lb on April 12, up from $13.30-14.20 per lb on March 22, which was just before the price rebound. The benchmark cobalt price had been under pressure since late November. The price started to trend lower to $33.25-33.95 per lb on November 21, according to Fastmarkets data.

“Some traders held the opinion that if they can buy below $15 per lb, in a two-to-three-year time scale, they are pretty much guaranteed to make some money from it,” Southgate said.

Traditional and western producers had been building up inventories ahead of the price rebound, and some producers lowered their offer prices for the material to lock in sales revenue ahead of the end of the financial year. This meant some traders were able to take the opportunity to secure cheap units.

Cobalt metal price likely to test new low during summer
However, this stockpiling activity and resulting price rise is temporary, and the price will be vulnerable to a backswing because metal producers are persistently building up inventories, according to Southgate.

“There is a subtle change in the demand,” Southgate said.

Although demand from the electric vehicle sector has strengthened as time goes on, there is a decline of demand from the mobile phone sector, Southgate told conference delegates.

“Some producers of raw materials for mobile phones are big consumers of metal and such demand is dropping,” Southgate said, adding that such traditional metal consumers now choose to feed on cheap hydroxide instead of metal.

Fastmarkets’ monthly cobalt hydroxide index, min 30% Co, came to $9.81 per lb, cif China on March 29, and payables were assessed at 66-68% against Fastmarkets’ standard-grade cobalt price (low end) on the same day. This is in comparison to the monthly average of Fastmarkets’ low-end price of the standard-grade cobalt price of $14.04 per lb in March. 

Although recent restocking may take away some producers’ inventory that was built up over the past few months, stocks are likely to continue to grow in the near future, Southgate said.

“My concern is these producers who had developed inventories will continue to develop inventories,” Southgate said.

In addition, demand is likely to weaken further in the summer, which is a traditionally weak consumption season.

“We could see price falling again, potentially testing a new low again,” Southgate said.

Susan Zou

susan.zou@metalbulletinasia.com

Published

Susan Zou

April 15, 2019

10:07 GMT

Shanghai