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The price of cobalt breaks through a three-year high, will it rise later? What are the changes in supply and demand during the year? What is the demand for cobalt in the downstream terminals next year? In response to the above hot topics, Oriental Fortune interviewed Ma Rui, an analyst of (SMM) battery materials in SMM. Ma Rui said that at present, domestic cobalt prices have begun to rise overseas because of reduced supply, and will also take into account the impact of the epidemic on logistics, forming a certain supporting effect on prices. From the perspective of supply chain and demand, the gap between supply and demand will still exist in 2022, and there is still room for cobalt prices to rise in the future.
Question: at present, the price of cobalt has broken through the new high of nearly three years, how to evaluate the price trend of cobalt this year?
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Ma Rui: first of all, I think the core point for the cobalt industry is cobalt resources. Congo alone already accounts for 50% of the world's volume and can produce 70% a year. The import and export of cobalt is generally transported from the Congo to the port of Durban in South Africa and then to the destination, so the transport capacity on the South African side also has a great impact on the overall cobalt price.
In terms of cobalt prices, first of all, in the first quarter of this year, manufacturers will generally make stock a year ago at this time before the Spring Festival, and the overall purchasing power of manufacturers is relatively strong. However, due to the epidemic last year, cobalt sources' expectations for the market are relatively high. On the other hand, there was a plan to store cobalt in China at that time, and the whole industry was in a low inventory level, which further promoted the situation behind it.
Second, there will also be some problems in the logistics mode in South Africa. The shortage of domestic cobalt raw materials is a persistent situation until the transport capacity is restored at the beginning of March, and the inventory of cobalt raw materials will soon be alleviated. It was only after this signal that cobalt prices began to decline again. After entering the second quarter, the whole downstream has entered the seasonal demand off-season, the inventory pressure on the manufacturer's side is decreasing, and the price will also carry on the downward channel. However, after the beginning of May, the reappearance of the raw material gap has slowed the price decline of smelting products this year. After entering the third quarter, everyone originally had a high expectation for consumption in the third quarter, but the overall demand performance did not reach this expected high level. After entering the fourth quarter, that is, the beginning of the current round of cobalt price rise.
Cobalt prices need to be separated from the two markets, from the overseas side, because the overall domestic price is higher than overseas, there is a wave of inventory transfer of electric cobalt to China. Recently, such as the overseas side of aviation, alloy demand has increased, and then superimposed overseas overall cobalt inventory is in a relatively low position, overseas cobalt prices all the way up.
At the same time, near the end of the year, the downstream cobalt source factory also talks about the price of intermediate raw materials. The price of this intermediate product is also priced quarterly by electric cobalt and intermediate products, and it is the time point for everyone to discuss the long order near the end of the year, so this coefficient is also very high, and the price of electric cobalt is also very high. Therefore, downstream for the purchase of raw materials is not particularly strong, wait-and-see mood is relatively heavy.
The price of raw materials is too high, but the domestic price of cobalt is not high, so there is a wave of upside down costs, and there will be a reduction in production. Now domestic prices will also slowly start to rise overseas because of the reduction in supply. In addition, it will also take into account the factors of the latest epidemic in South Africa, which may have some impact on the follow-up logistics, which will also form a certain supporting effect on prices.
Question: what will be the change in the supply of cobalt raw materials next year?
Marui: it is estimated that the supply of cobalt raw materials for the whole year of 2021 should be 177000 metal tons, of which about 147500 will come from the release of earth and minerals, accounting for about 83%. Upstream, 17% comes from manual mining and recycling, which is about 7000 gold tons and 23000 gold tons. According to the current supply expectations, on the whole, it can achieve a supply of about 200000 gold tons.
If it is to be split according to the raw material side, first of all, there should be a 14% increase on the ore side, which will probably reach a supply of 168600 gold tons, which mainly comes from the first split of traditional copper and cobalt mines, such as the restart of Glencore's Mudanta mine, and the (Tenke) mine on the Luomolo side will have some increments. In addition, like Indonesia, there will also be some nickel intermediate MHP projects, which will also be accompanied by some metals, so there will be an increase in the supply of cobalt raw materials.
In addition, in terms of hand mining, the volume of hand mining will continue to decline until next year because of the tightening of controls on hand mining in the Congo.
The last part comes from recycling, and with the gradual regulation of the recycling market and the gradual arrival of the wave of battery decommissioning, there may be an increase in the amount of recycling. So on the whole, it feels that there should be a small increase in the raw material supply of cobalt next year.
Question: what do you think of the demand for cobalt in the downstream terminal next year?
Ma Rui: our team estimates that there should be a demand for 194000 gold tons of cobalt raw materials in 2021, which can be divided into traditional industries such as lithium electricity and alloy catalysis. Among them, the demand for a single sector of the lithium industry can reach 130000 gold tons, while the traditional industry accounts for about 64000 gold tons. This demand should reach 208000 gold tons by the end of next year, with a projected growth rate of about 7 per cent.
First of all, in the lithium electricity industry, cobalt raw materials are still standing in the lithium electricity industry demand, is still standing in the whole cobalt raw material demand leading, the traditional industry is relatively stable, the growth rate is very low. From the perspective of the lithium industry, the power end is mainly used in batteries such as ternary systems. at present, the whole ternary system is under the impact of iron lithium, and the trend of 5 series and 6 series being replaced by iron lithium should be accelerated.
In addition, such as the gradual transformation of the ternary system to high nickel, this trend can be determined. Probably the overall growth rate will slow down later, because high nickel will have a performance of reducing cobalt. Another split should be from the digital market, because the subsequent expansion of the incremental market like digital is relatively limited, and the subsequent growth rate may also be relatively slow. Therefore, we expect that the subsequent growth rate of cobalt demand should also be relatively stable.
Question: do you have any expectations for the price of cobalt next year?
Ma Rui: after deducing from the supply chain and demand side, there will be a supply-demand gap of 17000 gold tons this year. In 2022, we predict that the gap will still exist, about 9000 gold tons next year, but the shortage has eased somewhat. First of all, there will be an increase in supply, but there is still a lower-than-expected risk of restarting or expanding production at the mine end, and there is still room for cobalt prices to rise in the future.
