Cobalt Prices Driven by Sentiment: What Is the Actual Demand?

Cobalt is a relatively illiquid market. This means that there is not a lot of trading volume in cobalt, which makes it more susceptible to price swings based on sentiment. As LME Week approaches, there is speculation on how long the current market rally will last, particularly in light of the upcoming negotiations for long-term cobalt metal, hydroxide, and sulfate supply agreements. 

The cobalt market has been experiencing a significant amount of volatility leading up to the fourth quarter. Investors and traders are keeping a close eye on the market, as it has been showing signs of instability in recent weeks.

Cobalt prices have fallen sharply in recent weeks, reaching a two-year low on September 29, thanks to a number of factors, including a slowdown in demand from the electric vehicle (EV) industry and concerns about a potential recession. 

Some analysts believe that the cobalt market is now in a surplus and that prices could continue to fall in the near term. Others believe that the current downturn is temporary and that prices will rebound as EV demand picks up again.

The outcome of the COP27 climate summit in November could also have a significant impact on the cobalt market. If the summit results in a more substantial commitment to renewable energy and electric vehicles, it could boost demand for cobalt and lead to higher prices.

Discussions revolving around the increasingly optimistic outlook on the cobalt market and the accompanying uncertainties are anticipated to dominate conversations during LME Week. The event is scheduled to take place from October 9-13.

CMOC’s Hydroxide Shipments to Arrive

As the market continues to fluctuate, a key factor to keep an eye on is the impending arrival of hydroxide shipments from China Molybdenum Co (CMOC). The load comes after the company struck a deal earlier this year with Gécamines, the state-owned mining company of the Democratic Republic of Congo (DRC). The industry eagerly awaits the impact of this agreement on the market, as all eyes remain fixed on the future of the global economy.

Following an export ban on certain materials, CMOC found themselves in a predicament as they were allowed to produce materials, which led to an excess stockpile of cobalt and copper. However, recent reports suggest that the export ban has been lifted. Sources now reveal that both the stockpile and newly produced materials from the Tenke Fungurume mine are making their way to China.

The arrival of CMOC’s hydroxide shipments is expected to have a significant impact on the cobalt market. The company is one of the world’s largest producers of cobalt, and its shipments could help to boost supply and lower prices. However, the impact of the shipments will depend on a number of factors, including the timing of the shipments and the state of the cobalt market at the time.

DRC Election: Logistics and Supply Chain Implications

As the Democratic Republic of Congo prepares for its presidential elections, market participants are keeping a watchful eye on the potential impact it may have on logistics within the country. Some have speculated that the upcoming election could have a ripple effect on the market, leading to a shift in supply chain dynamics and potentially affecting the flow of goods and services. Despite the uncertainty surrounding the election, businesses are bracing themselves for any potential disruptions to their operations and logistics.

With elections taking place in December, many anticipate that roadblocks and demonstrations could disrupt the transportation of goods and services. Adding to this is the increased security measures which could make it more difficult and expensive to move goods and people. It is very likely that before the elections, a considerable amount of material will be exported from the country in order to prepare for the possibility of unfavorable results or any disruptions that may occur.

Cobalt sulfate market declines, metal market rises

Cobalt sulfate Prices

Over the summer months, the cobalt sulfate market, a significant component of the intermediate complex, has displayed a decline in strength, leading to fluctuations throughout the market. However, during the same period, the metal market experienced a boost in confidence.

As the prices of sulfate continue to decrease, reports suggest that buyers are not eager to acquire the material due to a combination of poor demand and an upcoming week-long public holiday in China from September 29 to October 7. Consequently, the cobalt intermediates market has experienced a significant decline in liquidity.

The decline in sulfate prices has been attributed to a combination of factors, including decreased demand from the consumer electronics industry in China and forecasts of an increase in the availability of cobalt hydroxide during the fourth quarter of this year. These circumstances have led to a drop in demand for sulfate, causing its prices to fall.

Weaker demand for EVs in China impact cobalt prices

China is the world’s largest EV market, and a slowdown in demand there has had a big impact on cobalt prices. The demand for batteries is experiencing a shift in dynamics, as new technologies and industries emerge. This change is largely due to the increasing adoption of electric vehicles, which require a substantial amount of batteries to operate.

The demand for batteries is also being driven by the growing popularity of portable electronics, such as smartphones and tablets. These devices require high-quality batteries that can last for extended periods of time. 

As a result, manufacturers are exploring new battery technologies and designs to meet this growing demand. The shift in dynamics for battery demand is expected to continue as more industries and consumers adopt battery-powered technologies.

Some players in the market have seen a decline in their long-term outlook for cobalt due to a sluggish consumer electronics market and a shift towards battery chemistries that do not use cobalt. The use of cobalt in EVs may be reduced in the future, and it is uncertain how this will evolve over time, according to the attendee’s remarks.  

Several OEMs have voiced their intention to persist with utilizing nickel cobalt manganese (NCM) batteries for their electric vehicle (EV) production, despite the preference of others for lithium-based batteries.

Hydroxide market is heavily influenced by the sulfate market

According to a source within the production industry, the hydroxide market is heavily influenced by the sulfate market. The source explains that the performance of the sulfate market and the orderbook projections for the upcoming year will greatly impact the hydroxide market.

Cobalt hydroxide is an essential component in the production of various products, including cobalt metal and cobalt sulfate. As a precursor material, it serves as a vital ingredient that enables the creation of these products.

According to an industry insider in the cobalt market, the basics of hydroxide will hinge on the state of the sulfate market. While there is a significant degree of instability there, buyers have yet to show interest in sulfate material even in the face of low inventories.

Global demand for cobalt is projected to increase

Although there are apprehensions about the long-term outlook, the global demand for cobalt is projected to increase from an estimated 233,000 tonnes in 2023 to 260,000 tonnes in 2024. This upward trend suggests a positive future for the metal, despite lingering doubts about its sustainability.

Chinese cobalt producers are looking for new ways to increase their metal production. One approach they’ve been exploring is to modify their existing production lines to prioritize metal production over sulfate production. According to one consumer, this shift is relatively easy to accomplish. As a result, many industry insiders are anticipating a significant increase in the supply of metal materials both domestically in China and on the international market.

When it comes to converting to metal, there are many factors to take into account. It’s not just about the worth of the metal itself, but also the future implications of the shift. According to a cobalt trader, the current supply situation has put buyers in a position of power. As such, they hold the reins when it comes to making decisions about the direction of the market.

As LME Week approaches, cobalt sellers are anticipating a potentially pivotal moment for the industry’s sentiment. There is hope that the momentum towards a more positive outlook for cobalt will continue to grow following the conclusion of meetings. This makes LME Week a crucial event for the industry’s future outlook.

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