【SMM Analysis】Policy Expectations vs. Demand Vacuum: Cobalt Market Awaits Answers as Pre-Holiday Slide Continues

In the final three trading days before the National Day holiday, China's cobalt market wrapped up caught between two opposing forces: a demand vacuum and policy expectations. On one side, prices across most products continued to decline, with some even accelerating, while downstream purchases were universally absent. On the other, cobalt metal stabilized around the 250,000 yuan/mt level, standing out as a rare bright spot in an otherwise weak market. Attention has shifted to a possible adjustment of the quota policy by the government of the Democratic Republic of Congo (DRC), which has become the most important support for cobalt prices ahead of the holiday.

Cobalt metal was the only product to hold its ground this week. Prices on the electronic platform fluctuated narrowly around 250,000-255,000 yuan/mt, with the 250,000 yuan/mt level showing clear support - support that stemmed more from speculative positioning: the market is trading on expectations that the DRC government may adjust its quota policy to prop up cobalt prices. On the spot side, following consecutive declines in previous weeks, traders further raised their basis offers: low-end brands are now quoted at a basis of 2,000-3,000 yuan/mt, while mainstream brands' new cargoes are offered at a basis of 13,000-15,000 yuan/mt. Mainstream smelters kept ex-works prices at 285,000 yuan/mt, though a cut remains likely if prices stay at current lows after the holiday. Downstream buyers showed little interest, with no pre-holiday restocking activity observed.

The raw material side is also deadlocked, awaiting direction. The cobalt intermediates market remained in a quiet pattern with no offers, no inquiries and no transactions, yet beneath the calm, buyers and sellers continue to test each other's price tolerance. An overseas leading producer announced plans to purchase intermediates in the market at $14.5/lb, a clear attempt to prop up prices. Meanwhile, some miners and downstream players indicated that, against the backdrop of continued declines across other cobalt products, they could only accept prices below $13/lb. Rumors of a deal concluded at $12.5/lb also circulated during the week, though SMM has yet to verify its authenticity after extensive inquiries. The visible gap between the price-support level and downstream psychological prices will have to be resolved after the holiday.

The cobalt sulfate market declined at a relatively moderate pace, also partly thanks to policy expectations. Approaching the holiday, mainstream smelters largely suspended their offers, with only some low-quality cargoes seeing further price cuts to around 50,000 yuan/mt. Demand remained the market's core problem: smelters found it difficult to conclude deals no matter how they adjusted their offers. Cost-side pressure persisted: the MHP cobalt payable saw clear deals at 57.5%, corresponding to a spot production cost of around 52,000 yuan/mt, but with downstream players continuing to press prices lower, the payable faces the risk of further declines. Cobalt payables in the recycling segment maintained an overall downward trend, putting the corresponding spot cost at just above 50,000 yuan/mt, indicating that cost support is still slowly weakening.

The consumer electronics chain posted the steepest declines of the week. The traditional "Golden September" peak season failed to materialize, and with terminal restocking interest subdued, pressure transmitted from the bottom up: LCO prices retreated across the board as cathode producers stuck to cautious, sales-based production strategies, which were insufficient to offset the dual headwinds of falling costs and weak demand. Upstream, cobalt tetroxide saw concentrated adjustments in the final trading days before the holiday, with some producers actively quoting lower prices to boost quarterly performance, while production cuts continued to widen across the industry. Further up the chain, cobalt chloride prices fell day by day, with shipments concentrated in internal transfers within integrated producers for their own cobalt tetroxide output; non-integrated producers found almost no spot deals, and production cuts have become the main way for producers to digest inventory pressure.

Cobalt powder on the cemented carbide chain was not spared either - in fact, it fell even faster. Leading producers have cut offers to around 350,000 yuan/mt, some small and medium-sized producers to 330,000-340,000 yuan/mt, and actual transactions concentrated near 330,000 yuan/mt. Since the Mid-Autumn Festival, many cemented carbide producers have gradually entered holiday mode, with both production and procurement stalled. Downstream buying interest has fallen to a freezing point, depriving the market of even basic trading support.

Taking the pre-holiday close as a whole, the divergence in the cobalt market is clear: wherever there is an expectation to trade on, price declines moderated; wherever prices are left to be set by demand alone, they accelerated lower. After the holiday, the market faces a triple test: whether the DRC quota policy expectations will materialize, whether downstream demand can stage a substantive recovery, and whether the rumored low-priced intermediates deals and the price-support purchases can be verified by actual transactions. A positive answer to any of the three could help cobalt prices exit the current downward channel; otherwise, with the supply-demand balance evolving toward inventory accumulation, the cobalt market may continue bottom-seeking amid weak sentiment.