[SMM Analysis] Cobalt Salts Halt Slide on Metal Rally, but Two-Plus Months of Inventory Looms: Can Sentiment Hold?

The cobalt salt market caught a rare breather this week. A sharp rally in cobalt metal futures early in the week loosened the pessimism built up during the prolonged slide, and prices of both cobalt chloride and cobalt tetroxide stopped falling and held steady. A closer look, however, shows that this stabilization was driven by sentiment, not demand.

I. Sentiment Moves First: Sellers Hold Firm, Buyers Start Testing the Waters

After cobalt metal strengthened, offer behavior along the chain was the first to change. Holders of cobalt chloride became noticeably less willing to sell at low prices, discounted cargoes were withdrawn from the market, and producers showed a stronger willingness to hold prices; cobalt tetroxide offers also held steady overall. Downstream sentiment shifted as well: purchasing sentiment among cathode producers improved markedly, and several have begun approaching cobalt tetroxide producers to negotiate locked-in orders, with sizeable intended volumes. Some cathode producers believe prices have reached a low and the negatives have largely played out, giving rise to expectations of a price increase and easing earlier worries about buying just before a further drop.

II. The Gap Between Intent and Transactions: The Further Upstream, the Weaker the Response

Improved sentiment, however, has not translated into transactions, and its pull weakens the further upstream it travels. Most of the cathode producers’ order negotiations remain at the discussion stage, and in nature they look more like opportunistic bottom-fishing at current price levels than a vote of confidence in future demand. One step further up, cobalt tetroxide producers still hold relatively high inventories of their own and have little appetite for cobalt chloride, with their target prices clearly below the offers upstream producers are now holding. Rather than narrowing, the bid-ask gap has widened further, and trading quickly reverted to wait-and-see. In other words, this wave of sentiment sparked purchasing intent downstream, but by the time it reached the upstream, all that remained was sellers’ posturing on offers; the basis for buyers’ decisions has not changed.

III. Inventory Is the Real Answer: Over Two Months of Buffer Still Overhangs the Market

The root reason sentiment has struggled to pass through is inventory. SMM data show that as of October, combined upstream and downstream cobalt tetroxide inventory still covers over two months of demand. Physical stocks in this segment have fallen steadily since the start of the year, but mainly through producers’ deliberate output cuts rather than a pickup in demand. With downstream demand shrinking at the same time, inventory days have edged back up since August, and the pace of destocking has clearly slowed. With such a thick inventory buffer, even if the current round of locked-in orders materializes, it will be difficult for downstream players to generate sustained purchasing demand, let alone restock raw materials.

SMM believes that current buying sentiment can provide only short-term support for prices, and the medium- to long-term oversupply in the cobalt market remains unchanged. In the short term, cobalt salt prices are expected to consolidate within a narrow range. Locked-in orders, if finalized, may offer temporary support, but if destocking shows no meaningful progress, the price center could shift lower again. Going forward, key points to watch include whether the strength in cobalt metal futures can last, whether cathode producers’ locked-in orders actually materialize, and whether faster destocking can trigger restocking further upstream.