Cobalt stockpiling as Chinese national reserves: Market participants to take cautious stance

SHANGHAI, Sep 15 (SMM) — Recently, there have been market rumours that China plans to stockpile 2,000 mt of cobalt later this year as national reserves. Industry players said that the State Reserves Bureau (SRB) stockpiled around 3,000 mt of cobalt between 2014-2016 and there was no stockpiling over the past 4 years. The previous rumour was that SRB was to purchase 5,000 mt of cobalt. SMM learned from several major domestic refined cobalt suppliers that they have yet to receive official notices about government stockpiling.

Global demand for refined cobalt was severely hit by COVID-19 this year, especially in the aerospace industry. As most of the domestic refined cobalt stocks are held by traders and downstream demand is weak, large quantities of cobalt are available for sale in the market.   

As China produced just 9,000 mt of refined cobalt last year, cobalt prices may rise in Q4 if the rumour turns out to be true.

With increasing number of COVID-19 cases across Congo, Indonesia and South Africa, which are major suppliers or transport countries of cobalt raw materials, China is seeing tighter inventories of cobalt raw materials and may face risks of disrupted supply.  

As an important source of raw materials for military and aerospace industries, China is likely to stockpile cobalt to mitigate risks of disruptions of cobalt raw material supply or as military strategic reserves.  

Compared to the reactions to previous rumours earlier this year, market participants are somewhat insensitive to the new rumour this time. It is understood that SRB typically keeps its stockpiling decision confidential and determines the purchasing prices and quantities in a short period of time. Hence, SMM advises a cautious stance on this rumour of government restocking.

For more information on the cobalt market, please refer to the September edition of the China New Energy Monthly.