Cobalt fundamentals shift to narrower contract discounts

A sharp increase in cobalt prices, coupled with a clearer medium-term demand outlook for the market, has given sellers the upper hand in metal contract discussions – a distinct change since the start of the year – according to sources that spoke to Fastmarkets.

The demand picture has been brightened by strong demand from the electric vehicle (EV) market, complemented by the consumer electronics sector and some restocking. A tightness in the supply of cobalt hydroxide, typically used as a feedstock by these markets, has led to purchasing of metal units.
This advantage for sellers has shown itself as a narrowing of the discounts written into formula contracts, which are typically agreed with a percentage discount against a monthly average of the low-end of Fastmarkets’ benchmark standard-grade metal price assessment.
In October 2020, sellers booked discounts broadly within a range of 6-8%, according to sources. Buyers believed that there was good metal availability so some were willing to bide their time before signing up for larger volumes.

Some sellers were concerned at the time, because some consumers did not want to discuss contracts at all, or were looking for shorter contracts and potentially lower...

Published

Michael Greenfield

March 08, 2021

13:45 GMT

London