Graphic: State purchases drive up cobalt metal prices in China

Jinchuan International Resources

18/11/2020 11:26

* China to add 2,000 tonnes of cobalt to stocks -sources
    * China's cobalt metal capacity close to 20,000 tonnes -CRU

    By Pratima Desai and Min Zhang
    LONDON/BEIJING, Nov 18(Reuters) - Purchases for state
stockpiles are driving up prices of cobalt metal in China,
creating a hefty premium over the rest of the world and
encouraging local producers to add large amounts of production
capacity.
    Cobalt prices in China above $18 per lb  SMM-REM-RCB  are up
15% since talk of buying by the National Food and Strategic
Reserves Administration started in July.  urn:newsml:reuters.com:*:nL8N2G84HJ
    
    
    Elsewhere prices at around $15.75 per lb are under pressure,
mainly because COVID has shrunk demand from the aerospace
industry, which uses cobalt metal for jet turbine blades.
 urn:newsml:reuters.com:*:nL8N2E14Q6
    "The first round of (China) stockpiling is still in
progress...with a total amount of 2,000 tonnes estimated to be
bought," said Arena Yan, analyst at CRU in Shanghai, adding that
the process was expected to be completed by April.
    "Rumours are circulating about a second round."
    China's national reserves administration in response to
requests for comment said: "We are not aware of the situation
you described". 
    A source at Jinchuan Group said China would buy about 2,000
tonnes of cobalt metal and that Jinchuan would supply around a
third of that. Jinchuan did not respond to emailed requests for
comment.
    CRU estimates China's cobalt metal capacity is close to
20,000 tonnes, up from around 13,000 tonnes last year. It
expects global cobalt production at 138,000 tonnes this year, of
which more than 35,000 tonnes will be metal.
    Traders say China has already stockpiled between 5,000 and
7,000 tonnes of cobalt metal.
    "China bought when prices crashed to $10 about five years
ago," a trader said, adding that supplies of cobalt hydroxide
used to make chemicals for electric vehicle batteries were
tight. 
    This is partly because Glencore's  GLEN.L  Mutanda mine in
the Democratic Republic of Congo has been shut since November
last year and COVID-related bottlenecks in Durban through which
DRC minerals are typically shipped.
    "Fears over tightening hydroxide supply in 2021 have kept
prices/payables at relatively high levels," said Caspar Rawles,
analyst at Benchmark Mineral Intelligence (BMI).
    Payables, a reference to the percentage of the cobalt metal
price used to price hydroxide, have climbed to around 80% from
60% last December, according to BMI.
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Cobalt hydroxide payables    https://tmsnrt.rs/2KhGVKA
China cobalt prices vs rest of the world    https://tmsnrt.rs/35DKzqd
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 (Reporting by Pratima Desai and Min Zhang; additional reporting
by Tom Daly; editing by Barbara Lewis)
 ((pratima.desai@thomsonreuters.com; +44 207 513 5681;))