[SMM Analysis] South Africa extends the "closed country" to the end of April cobalt salt prices may stop falling

SMM4, April 10: South Africa time on April 9, President Ramafosa announced that South Africa will extend the "enfeoffment" measures until the end of April. According to statistics, by 09:31 today, a total of 1934 new cases have been confirmed in South Africa, and the epidemic situation in Africa is not optimistic for the time being.

According to reports, Ramafosa said that since the implementation of the "enfeoffment" measures on March 26, remarkable results have been achieved. In the first two weeks, the number of confirmed cases in South Africa increased by an average of 42% a day, and after the beginning of "enfeoffment", the increase dropped to only 4%. In the light of the experience of other countries, South Africa has decided to continue to implement the "city closure" measures until the end of April. In the meantime, the government is likely to allow some industries to resume operations under strict control in order to achieve a phased recovery of the economy. The news may increase the smelter's "high price" confidence, raw material cost support has strengthened, but downstream demand is still low, the power market is expected to gradually return to normal at the end of April or early May, and the increase in the consumer market is also lower than expected.

In terms of raw materials, according to SMM research, cobalt raw materials in domestic smelters can be used until the end of April, and cobalt raw materials such as offshore and bonded areas can be used until the end of May. The South African "closure" measures to the end of April mainly affect the domestic raw material imports from May to June, according to SMM customer feedback, the current cobalt raw material exports after mid-April may be delayed.

From the perspective of cobalt salt stocks, according to the SMM balance sheet, cobalt salt accumulated about 1900 tons of metal tons from January 2018 to March 2020, accounting for about 80 per cent of the expected downstream demand in April, that is, regardless of the normal start-up of the cobalt salt plant in April, the current cumulative cobalt salt stock can meet nearly 80 per cent of the expected downstream demand in April. In the near future, the mainstream cobalt salt plants are interested in "offering". According to customer feedback, the price has been basically maintained, and a small number of cash transaction orders have appeared in the past two days, and the price has dropped slightly. Therefore, in the short term, it is still not ruled out that a small number of cobalt salt plants have not returned funds to maintain their operations, and a small amount of low-price selling behavior.

Downstream demand, according to SMM research, April is expected to slow recovery of the power market, the digital market affected by overseas exports, procurement volume may decline; cobalt oxide in April expected a slight decline in demand for cobalt salt, mainly due to the increase in orders for some large cobalt oxide plants in March, the operating rate is higher, demand in the lower reaches of April slightly weakened, expected to reduce the operating rate, the rest of the manufacturers are expected to start basically the same.

Therefore, in the short term, even if South Africa continues to "seal off the country", the low demand in April still dominates, and the price of cobalt salt still has room to fall slightly, mainly due to the fact that the downstream buyer's market is still relatively strong and the price reduction is serious, which does not rule out the signing of a small amount of cobalt salt plant funds under pressure to reduce prices; if domestic demand gradually recovers in early May, cobalt raw materials will be affected, and the price of cobalt products may stop falling from May to June.

SMM cobalt lithium new energy research team

Hu Yan 021-51666809

Qin Jingjing 021-51666828

Mei Wangqin 021-51666759

Huo Yuan 021-51666898

Wuyang 021-51666818