Will Cobalt Supply Chain be Disrupted by COVID Omicron Virus?

SHANGHAI, Dec 1 (SMM) -The average refined cobalt prices stand at 431,500 yuan/mt as of November 30, hitting a record high in the past three years.
The booming growth of global NEVs production and sales drives the demand for cobalt. The worsening of COVID in Africa and international shipping led to a continued decline in the imports of cobalt raw materials. According to customs data, China imported 5399 mt of cobalt raw material in metal content in October, a month-on-month decrease of 31% and year-on-year decrease of 49%. The imports of cobalt raw materials totalled 73,700 mt in metal content from January to October, up 3% YoY.

From January to October, the average monthly import volume of cobalt raw materials was 7,371 mt in metal content, of which the average monthly imports of cobalt intermediate products was 6,667 mt in metal content. The domestic cobalt raw material inventory gap is still large.

According to cobalt raw material suppliers and smelters, the uncertainty of shipping schedule will continue at least until Q1 2022, so the domestic cobalt raw material inventory continues to be tight. Overseas refined cobalt prices rose further amid positive fundamentals, which makes the pricing benchmark of cobalt intermediate products rise; the spot quotation coefficient is likely to remain high amid low spot inventory and thin quotations of small orders of cobalt intermediate products.

Downstream producers of battery materials mainly reduce inventory until December. Therefore, the transactions of domestic battery materials thinned. Downstream battery plants and end-users will restock for the Chinese New Year from January next year. Cobalt salt prices are likely to increase amid low cobalt raw material inventory and high prices. In 2020, with the outbreak of the overseas pandemic, South Africa, the largest transit point for cobalt transportation in Africa, had implemented a lockdown policy in March, resulting in poor transportation in the global cobalt supply chain. The confirmed cases in South Africa exceeded 1,000 in a single day on the new mutant on November 26.

If the new variant cannot be effectively controlled in South Africa, the cobalt supply chain may be disrupted. The supply of raw materials is expected to tighten due to the concentrated restocking by battery plants, and cobalt prices are likely to rise sharply.