[SMM Analysis] Cobalt Market: Demand Weakness Throughout the Industry Chain, with Cost Support and Substitution Pressure Coexisting

Cobalt products overall trended lower this week, with a sluggish trading atmosphere and no substantial improvement on the demand side. However, price performances varied slightly across segments, reflecting uneven obstruction of cost transmission among different products.

On the upstream side, the cobalt chloride market edged down this week, with cost and sentiment becoming major bargaining variables. Even the recycling route with cost advantages faced losses across nickel, cobalt, and lithium, and rigid cost support gradually emerged on the cost side. Constrained by previously high-priced inventories and current high-cost raw materials, sellers' willingness to sell at low prices weakened, and the sentiment of holding prices firm strengthened compared with earlier periods. Although demand remained sluggish, with sporadic purchases providing limited boost to prices, the recent announcement by top-tier upstream players of plans to buy intermediate products at $16/lb without quantity limits injected certain floor expectations into the market, thereby narrowing the downside room. In the short term, cobalt chloride prices are expected to consolidate on a subdued note, largely stable.

The transmission of this cost change encountered certain obstacles at the Co3O4 segment. This week, Co3O4 market trading was also limited. Notably, despite the decline in upstream cobalt chloride prices, top-tier Co3O4 producers did not follow suit with significant price cuts in their quotes, showing a strong intention to stabilize prices. In an environment of insufficient orders, enterprises tended to maintain price expectations to avoid the negative cycle of price drops—wait-and-see—further price drops. However, the reality of low downstream purchase willingness and actual transactions mainly dominated by small rigid demand orders impeded cost transmission in this segment, widening the price spread between Co3O4 and cobalt chloride. Without strong demand volume to support, Co3O4 is expected to move sideways in the short term, with limited downside room but also insufficient upward momentum.

The downstream LCO segment faced more structural pressures. This week, LCO market performance was basically flat compared with last week, consolidating on a subdued note. On the supply side, producers' operating rates remained low. Continuous price cuts since the start of the year had significantly squeezed profit margins, but the boost to shipment volumes was limited, leaving producers with little willingness to actively raise output. The demand side was under dual pressure: First, battery cell manufacturers' own production schedules were weak, providing limited actual boost to LCO; second, the downstream substitution rate by ternary cathode materials continued to rise, further eroding LCO's demand space. With no improvement in the supply-demand structure and slow inventory digestion, LCO prices still face downward pressure in the short term, though the decline may be relatively mild given the gradually descending upstream cost support.

Overall, the cobalt market is currently in a weak balance, with the core contradiction being sluggish demand recovery. Cobalt chloride, supported by intermediate product purchases as a floor and cost support, has controlled downside in the short term. Co3O4, due to producers' price-stabilization strategies, has temporarily disconnected from the transmission path of raw material declines, showing an independent consolidation trend. LCO, squeezed by both substitution effects and weak demand, is under the most evident pressure among the three products. Whether the future market can break through will still depend on the pace of recovery of production schedules on the downstream battery cell side and the signals of end-use consumption recovery.