[SMM Analysis] Cost Inversion Fails to Halt Slide as Cobalt Salt Weakness Spreads Down the Chain

This week, prices of cobalt chloride and cobalt tetroxide continued to decline, with thin transactions across the industry chain and market sentiment remaining weak. Cobalt chloride fell day by day throughout the week, with the pace of decline accelerating further from the previous week, while cobalt tetroxide moved lower in line with the market, its price center shifting further downward.

Upstream, the cobalt chloride market was marked by falling prices, losses and production cuts occurring simultaneously. After the earlier rapid price slide, mainstream smelters have fallen into cost inversion, and most are maintaining low operating rates to digest inventories. A gap remains between producers’ ideal offers and prices at which deals can actually be concluded, prompting some enterprises to stay on the sidelines. However, the cost side has failed to provide effective support. The price center of cobalt intermediates continued to move lower, and smelters under loss pressure have curbed their willingness to purchase raw materials. Meanwhile, cargoes shipped earlier from the DRC have been arriving successively, bonded inventories have been replenished, and raw material supply constraints are gradually easing, while payable coefficients for lithium cobalt oxide black mass on the recycling side have also dropped rapidly. Lower costs in turn open up new room for smelters to cut prices to move goods, and the negative feedback loop of price cuts, losses, lower raw material bids and further cost declines is unlikely to be broken in the short term. On the demand side, downstream buyers have become increasingly cautious. Given the earlier rapid decline, buyers showed little willingness to follow up, with only a small volume of rigid-demand purchases concluded. Even some relatively stable niche demand has weakened, purchasing frequency has dropped noticeably, and actual upstream transactions remain very limited.

In the midstream cobalt tetroxide segment, the cost easing brought about by the rapid fall in upstream cobalt salts continued to pass through, and cobalt tetroxide prices were adjusted downward in line with the market. On the supply side, some enterprises are already selling at a loss, with high-cost producers under more pronounced pressure, and industry operating rates remain low. On the demand side, inquiries and actual orders from lithium cobalt oxide cathode producers were both thin. Most enterprises hold relatively high raw material inventories, some previously signed long-term contract volumes have yet to be collected, and with end-market demand weak, they currently have no intention of signing spot orders, leaving little urgency to restock. Until existing long-term contract volumes are fully digested, spot demand for cobalt tetroxide is unlikely to pick up meaningfully.

Overall, the core contradiction in the cobalt salt market lies in the mismatch between weak demand and recovering raw material supply. Downstream players are focused mainly on digesting inventories and long-term contracts, with purchasing appetite subdued, while upstream, rising intermediate arrivals and falling recycling coefficients continue to weaken cost support. SMM believes that cobalt chloride prices will continue to run weak in the short term, while cobalt tetroxide will remain in weak consolidation as costs move lower. Until downstream players resume substantive restocking, it is hard to say cobalt salt prices have bottomed. Going forward, attention should be paid to the actual pace of intermediate arrivals, smelters’ restocking moves once cobalt salt prices stabilize, and the progress of downstream long-term contract digestion.