Battery Metals

Cobalt Investing

COVID-19’s impact on the cobalt supply chain was mostly felt in shipments and logistics, specifically the shipment of DRC cobalt from South Africa.

The cobalt supply chain faced challenges in the first half of the year as lockdowns to fight the coronavirus pandemic saw shipments and logistics take a hit.

Taking COVID-19 into account, prices for the metal have performed in line with expectations, according to Benchmark Mineral Intelligence Head of Price Assessment Caspar Rawles.

“Starting in late June and into July we saw cobalt prices surprise to the upside linked to the ongoing impacts of the lockdown in South Africa in April,” he told the Investing News Network.

In July, cobalt hydroxide payables, which is the value of cobalt in hydroxide compared with metal, increased by about 10 percent.

“(This) is a huge move in the space of a month — typically we have been seeing 2 to 4 percent moves in the payable month-on-month,” he said. “The increase in feedstock prices has also driven the cobalt sulfate price to increase in China, which we tracked up by 3.8 percent in July.”

Metal prices have also started to increase from their lows in recent weeks, Rawles added, something which was unexpected due to the ongoing demand impacts of the pandemic on the typical industrial applications of cobalt metal.

When looking at demand from the electric vehicle (EV) segment, the first few months of the year saw a slowdown in EV demand that hit battery metals across the board.

However, even though demand recovery from the downstream EV supply chain has so far been relatively slow, it continues to improve, Rawles said.

“The surprise we have seen is the strong recovery in sales for BEV/PHEV sales in Europe, which as a region sold more EVs than China in H1,” he added.

This was most likely driven by the stimulus policy announced by France and Germany, among others.

“If demand continues as we saw in late H1 2020 within Europe and sales in China improve further, our demand exceptions will increase during our next forecast update,” Rawles said.

In other segments, demand from portable electronics has been relatively strong throughout H1, linked to the launch of new 5G mobile devices and better-than-expected laptop/tablet demand.

When looking at supply of cobalt during the first half of the year, Rawles said production has remained stable since the initial shutdowns in March/April, with the key closures being Ambatovy in Madagascar and Chemaf’s operations in the Democratic Republic of Congo (DRC).

“Our supply outlook hasn’t changed much since Q1. We have seen limited impact to production at the mine site generally speaking, although issues have arisen in getting the cobalt from the mine to refiner.”

The impact of the coronavirus on the cobalt supply chain was mostly felt in shipments and logistics, specifically the shipment of DRC cobalt from South Africa, which imposed lockdown measures for around one month, Rawles explained.

Despite this short time under lockdown, the lingering impacts of port congestion and delays has seen a scramble for cobalt hydroxide by Chinese refiners, particularly in June and July, Rawles noted.

“(As a result, this) has driven some significant increases in the relative cost of cobalt hydroxide — although this has been tempered to some extent due to the falling/low metal price,” he said.

Exports from Africa plummeted following the lockdown and are yet to return to normal levels.

“Events like this highlight how disconnected the global industrial metal market and the battery/chemical market in China/Asia can become,” Rawles said. “For a period we saw metal falling at a time when the hydroxide feedstock/chemical market in China was surging.”

As the second half of the year continues to unfold, cobalt-focused investors should keep an eye on catalysts that could impact the space.

“Any further impact to DRC logistics/production linked to the virus is the major unpredictable factor, although I think this is relatively low risk,” Rawles said. “Also, continued surprise to the upside on European EV sales could be a major factor.”

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.



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