Cobalt city supply and demand relationship triggered by high power battery

After a lapse of half a year, the supply and demand in the cobalt market was once again tense. "We have no goods in January!" On January 9, 2018, the relevant person in charge of the sales department of Jiangsu Kailik Cobalt Co., Ltd. told the Shanghai Securities Journal reporter. Huayou Cobalt has suspended the offer of products such as cobalt oxide and has clearly requested “payment to delivery”. Supply and demand tensions are also reflected in the price. Since November 2017, cobalt prices have continued to rise. Taking battery -grade cobalt trioxide as an example, the latest offer is about 430,000 Yuan / ton, up about 20% from 360,000 Yuan two months ago. The latest offer for electro-cobalt is between RMB 550,000/ton and RMB 560,000/ton.

Yonggang Sun, deputy secretary-general of the Cobalt Industry Branch of the China Nonferrous Metals Industry Association, analyzed that the rise in cobalt prices was basically within expectations. China is a cobalt-poor country with an import dependency of over 90%. The rising cost of raw materials is a factor driving price increases. In addition, the new energy power battery industry has a high degree of prosperity, and the increase in demand is almost the same as the entire industry chain. Due to the rapid increase in the prices of raw materials and products, smelting companies control the pace of shipments, and also promote the rise in cobalt prices. From the current situation, the price of cobalt is likely to rise and fall. It is expected that it will remain at a high level for some time in the future, and it is expected to exceed 600,000 Yuan/ton.

Power battery explosion boosts expectations

The recent rise in cobalt prices started in early November 2017, after the market has been adjusted for about eight months. “In the second half of 2016, cobalt prices have soared in the short term. In March 2017, the price of cobalt trioxide was up to 410,000/ton. Later, it entered the adjustment, but the market has been expecting price increases. Recently this wave of price increases has exceeded the previous round the highest price." A vice president of a listed company told reporters. One of the company's main businesses is the production of new energy battery cathode materials cobalt is an important raw material.

In fact, cobalt prices have hit a new high in this cycle (since September 2011). On January 9, 2018, the index was 194.18, an increase of 178% from the lowest point of 69.84 on July 5, 2016. According to statistics, the domestic metal cobalt price rose by about 97% throughout 2017.

In the international market, the increase in cobalt prices is much larger. Based on the British Metal Guide (MB) quote, the low-grade cobalt offer was $14.3/lb to $15/lb on the first trading day of 2017, and the quoted price reached $35/lb on the last trading day of 2017. To $37/lb, the annual increase was about 145%.

The huge demand for cobalt in power batteries provides medium and long-term support for the rise in cobalt prices. According to estimates by Zhongtai Securities, with the development of new energy battery industry, global cobalt demand is expected to grow at an average annual rate of 10% from 2017 to 2020. Demand in 2017 and 2018 will reach 115,400 tons and 127,600 tons respectively. On the supply side, as the price of cobalt rises, it is not ruled out that new projects will be put into production, but subject to the 1.5 to 2 year expansion cycle, the supply will show strong rigidity constraints. After the supply and demand inflection point in 2017, 2018 the annual supply and demand gap will continue to expand.

Anxin Securities Qiding Nonferrous Research team pointed out that in the fourth quarter of 2016 and the first quarter of 2017, the domestic cobalt salt factory had a large-scale replenishment of stocks. At that time, the price of cobalt at home and abroad rose sharply. However, in the second and third quarters of 2017, domestic cobalt prices and MB quotations showed a significant deviation, MB quotations continued to rise, domestic cobalt prices fell weakly, and even domestic cobalt salt plants were imported if they imported overseas mines for processing will face a loss situation. However, since October 2017, domestic cobalt prices have started to rise, and the price difference between domestic and foreign cobalt has narrowed significantly. This shows that more and more domestic mineral deposits of cobalt salt plants have been basically consumed, and it is necessary to buy overseas cobalt mines and accept high MB prices. The simultaneous sale and reluctance to sell also boosted domestic cobalt prices.

Many companies are rushing to overseas mines

The continued rise in cobalt prices has also attracted more and more capital to advance to upstream mines. On January 4, 2018, Yinhao Technology announced that the subsidiary has recently invested US$1 million to establish a subsidiary in the Democratic Republic of the Congo to expand its cobalt resources business. A few days ago, Dow Technology disclosed that Sun Company Hong Kong Jana intends to indirectly acquire 100% of MJM's equity for 350 million Yuan. MJM is also located in Congo (Golden), Africa, and is principally engaged in the production and sale of metal cobalt, electrolytic copper and other cobalt-related products.

Congo (DRC) is the world's most abundant cobalt resource, reaching 3.4 million tons, accounting for 47.2% of the world's total reserves. China has proven reserves of 637,000 tons of cobalt, but in fact the reserves of mining significance are only 60,000 tons, mainly concentrated in the hands of Jinchuan Group. Congo (Gold) has also become the preferred location for domestic capital to find cobalt.

Huayou Cobalt has been operating in Congo (Kinshasa) since 2003, establishing its own mines, local trading systems and bulk traders to directly purchase the three major ore supply systems. The PE527 project acquired by the company has started construction in early 2017 and is expected to release capacity this year. The mine has a cobalt and metal reserve of 55,400 tons, and the annual production capacity of cobalt metal is about 3,100 tons. In addition, the company's MIKAS technical transformation project is also underway. After the completion of these two projects, it is estimated that the production capacity of the own cobalt mine will be about 4,000 tons/year to 4,500 tons/year.

Hanrui Cobalt has established a subsidiary in Congo (Gold) since 2007. It is mainly engaged in the acquisition of copper and cobalt resources, rough processing and export business, and the production and sales of electrolytic copper. The company recently disclosed that it plans to invest 20,000 tons of electro winning copper and 5,000 tons of cobalt hydroxide in the Kolwezi, Congo (Golden), and the company's listed investment project, Congo Meite Mining, has an annual production capacity of 5,000 tons of electrolytic cobalt production line. Complete the construction of the front-end 5,000 tons of cobalt hydroxide project.

The biggest handwriting is Luoyang Molybdenum. In 2016, the company completed the acquisition of a 56% interest in the Congo (gold) copper and cobalt company TFM and a 100% interest in the Brazilian bismuth and phosphorus assets project. In 2017, it won another 24% equity interest in TFM. TFM is the second largest copper-cobalt mine and producer of electrolytic copper and cobalt hydroxide in Congo (Golden). It has the world's largest copper ore mine with the highest ore grade - the TenkeFungurume mine, with an ore reserve of 183 million tons, copper and cobalt metal. The reserves are 471,800 tons and 569,000 tons, respectively, and the grades are 2.6% and 0.31% respectively.

Shengtun Mining is also actively deploying cobalt resources. The company announced on December 29, 2017 that its wholly-owned subsidiary, Shengtun Shang Hui, subscribed for a 25% stake in CMI for US$6 million. CMI indirectly holds a 7.24% stake in Copper Tree Ltd. Its main asset is the Kitwe copper-cobalt project in Zambia. Previously, the company also invested US$129 million for the comprehensive utilization of 3,500 tons of cobalt and 10,000 tons of copper in the Congo (Golden) region.

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