Average refined cobalt prices estimated at 290,000 yuan/mt in 2020

SHANGHAI, Dec 30 (SMM) – China's cobalt prices were in a downward trend in 2019 with the year-end prices nearly half of the highest level at the start of the year, SMM assessments showed. 

Changes in the cobalt resources supply, downstream consumption, and the trend towards an integrated industry chain were the most important factors affecting cobalt prices this year.

SMM estimates the annual average prices of refined cobalt at 290,000 yuan/mt in 2020. The average prices of cobalt (II, III) oxide, cobalt sulphate, and cobalt chloride are seen at 220,000 yuan/mt, 53,000 yuan/mt, and 65,000 yuan/mt, respectively. 

On the supply front, mining company Glencore announced in August to suspend its Mutanda mine in the Democratic Republic of Congo from year-end, for two years, since it was "no longer economically viable" in a falling market. This improved prospects for a smaller supply glut and triggered a cobalt price rally in the third quarter, after prices slipped since the start of the year. 

The lithium-ion battery sector accounts for more than 80% of cobalt consumption in China, with demand from digital lithium batteries twice that from power lithium batteries.

Despite the positive performance of the digital battery market in the second half of the year and the emerging 5G market that boosted downstream stockpiling, continuing weakness in the power battery market after the national NEV subsidy cuts since late June kept cobalt prices subdued. 

The market sees a pickup in demand from the new energy market in 2020, with optimistic prospects for the digital market given the replacement demand for digital devices. 

As downstream producers such as carmaker BMW and battery maker SK Innovation (SKI) announced plans in 2019 to procure raw materials directly from miners, a more integrated industry chain will see the traditional pricing model between smelters and miners unable to meet the evolving demand. 

SMM expects the fluctuation in cobalt prices to become smaller in the long run as demand and supply move toward balance.