China's cobalt salt producers likely to face supply disruption amid raw material shortage in Africa

Published: Mar 26, 2020 12:23 (GMT+8)

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China’s cobalt salt producers could face risks of raw materials shortage in June if the coronavirus outbreak continues to worsen in African countries and disrupt Congo’s ore exports in April, SMM estimates. But in the short term, prices of cobalt products in China may extend their downside trend as the demand outlook remains weak amid the COVID-19 impact.

SHANGHAI, Mar 26 (SMM) – China’s cobalt salt producers are facing risks of raw materials shortage in June and July if the coronavirus outbreak continues to worsen in Africa, causing disruption to Congo’s ore exports in April, SMM estimates.

Congo, the world's largest miner of cobalt, has shut its borders and declared a state of emergency on Tuesday, following other African nations that imposed strict measures to contain the spreading of COVID-19.

Haut-Katanga, Congo’s key production province of copper and cobalt, was under a two-day lockdown from Sunday after two people were tested positive for COVID-19. The region accounts for nearly all of the country’s output of cobalt.

Zambia’s UPND president Hakainde Hichilema has suggested a complete lockdown on the country for at least two weeks, including closing all borders and airports. Meanwhile, South Africa has decided to impose a nationwide lockdown for 21 days from midnight on Thursday. These measures could deter cobalt ore deliveries from Congo as Zambia and South Africa serve are important transit countries for Congo’s cobalt ore exports.

In China, downstream producers that consume cobalt ore have raw materials that could roughly meet production need until late May, SMM assessed based on the stockpiles in plants and at ports, as well as shipments en route.

Domestic cobalt salts factories are mostly running at 70-80% operating rates as downstream demand has been badly hit by the virus outbreak. Trades in the cobalt salt market were muted since the beginning of March with downstream producers of ternary precursor and cobalt (II, III) oxide restocking cautiously.

In the short term, prices of cobalt products in China may extend their downside trend as the demand outlook remains weak due to the COVID-19 impact.

According to SMM assessments, domestic prices of cobalt sulphate stood at 44,500-47,500 yuan/mt as of March 25, flat from the previous day while down 5,000 yuan/mt from a week ago. Prices of cobalt chloride were assessed at 56,500-59,500 yuan/mt, 4,000 yuan/mt lower on the week.

Coronavirus impact COVID-19 Market commentary Cobalt Cobalt ore

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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