[SMM Analysis] Can Cobalt Prices Fall Further in 2026?

Conclusion first: cobalt prices in H2 are more likely to rise than fall. Any disruption from external factors could further exacerbate tight supply, thereby pushing cobalt prices higher.

 Most Chinese-invested miners own self-built smelters or have cross-shareholding and long-term close cooperative relationships with downstream enterprises. Therefore, the DRC export quotas obtained by Chinese-invested companies will be delivered to China's downstream market in a timely and stable manner. We calculate the quotas of Chinese-invested and foreign-invested companies separately.

 I. Based on current market conditions, we make the following assumptions:

1. DRC shipment pace: maintaining current efficiency. It is expected that in July this year, goods from 25Q4 and 26Q1 will arrive at ports successively; by the end of 2026, goods from 26Q2-3 will arrive in batches.

2. Indonesian MHP supply: even with disruptions from external factors such as Middle East geopolitical conflicts, cobalt supply from Indonesian MHP will at least not decline YoY. Total cobalt imports from MHP in 2025 were 53,000 mt in metal content, and 2026 is expected to be no less than 53,000 mt in metal content.

3. China recycling volume: annualized based on enterprise recycling volumes in 26Q1. Monthly ternary cobalt recycling volume is expected to be no less than 1,000 mt in metal content, and high-cobalt recycling volume no less than 1,500 mt in metal content.

4. Raw material supply structure: intermediate product supply directed to ternary cathode is expected to decline to approximately 7,000 mt in metal content in H2 2026; no major shifts in other existing supply structures.

5. China inventory buffer: current upstream and downstream enterprise raw material inventories can sustain supply through June this year. Before intermediate products arrive in bulk during June-July, no supply disruption will occur across the market. Moreover, apart from refined cobalt, other raw materials no longer have large inventories.

 II. Supply and Demand

1. Ternary sector:

Demand side: full-year 2026 ternary cobalt demand is estimated at 58,000 mt in metal content.

Supply side: cobalt imports from MHP in 2026 at 53,000 mt in metal content; ternary cobalt recycling at approximately 12,000 mt in metal content; intermediate product supply to ternary in H2 2026 at 7,000 mt in metal content.

2. LCO, cathode additives, and cobalt powder:

Demand side: total full-year 2026 demand for LCO, cathode additives, and cobalt powder is estimated at 81,000 mt in metal content. H1 is primarily focused on digesting inventories and high-cobalt recycling, with H2 (July-December) demand at approximately 42,000 mt in metal content.

Supply side (H2): non-DRC quota sources combined with high-cobalt recycling are expected to provide at least 12,000 mt in metal content; from DRC export intermediate products, counting only the Chinese-invested enterprise portion, approximately 40,000 mt in metal content can be supplied. Total H2 supply is approximately 52,000 mt in metal content.

3. Refined Cobalt

Rigid demand production: certain downstream industries have rigid demand for refined cobalt, consuming approximately 400 mt in metal content of intermediate products per month for refined cobalt production, with all raw materials being intermediate products. This volume is not high overall but remains stable.

Inventory impact: under the high-priced intermediate product environment, the current large inventory of refined cobalt will have a significant impact on the production side. Therefore, we currently calculate based primarily on rigid demand production.

4. Chemicals

Industries such as feed and adhesives have relatively stable monthly demand for cobalt hydroxide. On average, monthly demand is approximately 1,000 mt in metal content, with raw materials primarily being MHP.

Considering all the above, inventory buildup by the end of 2026 is 8,000 mt in metal content for MHP and 7,000 mt in metal content for intermediate products.

Miner behavior: some miners are currently purchasing intermediate products on the market at relatively high prices, close to or reaching the level of $26/lb. Judging from this behavior, market participants generally have expectations for the H2 market, and the likelihood of selling at low prices is relatively small.

III. Future Expectations

Based on the above supply-demand balance analysis, whether on the upstream supply or downstream demand side, any shortfall in supply versus expectations or any recovery in downstream demand will impact the current fragile balance, at which point foreign-invested goods will need to enter the market to supplement supply. Therefore, the overall tone for the 2026 cobalt market is considered to be more likely to rise than fall.

Wang Zhaoyu 15927163529