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Supply and Demand Situation in Domestic Cobalt Industry May Come to a Turning Point

Multiple factors overlapped to bring opportunity to the cobalt business unit: Three factors of “Shrinking Supply” + “Growing Demand” + “Price Bottom” overlap to change market’s future expectation for cobalt products. As a big power of cobalt refining and cobalt consumption, China received obvious impact, relevant enterprises mainly include Huayou Cobalt, China Molybdenum, and GEM.

Product prices remained at relative bottom: Since the financial crisis in 2008, cobalt price continued to drop, plunging from 860,000/tonne at its highest to below 200,000/tonne level, although at present cobalt product prices still remain at lowest level in history, judging from changes in future supply demand relation, it is possible that cobalt products may experience price hike.

Supply and demand situation in cobalt industry will soon meet a turning point: In 2015 global supply of refined cobalt is about 102,000 tonnes, and cobalt demand is about 92,000 tonnes, supply obviously exceeds demand. However, after entering 2016, the supply demand relation experienced evident change. Cobalt is associated ore of copper and nickel, since copper price continued to fall, the supply shrank. Wherein Glencore shut down two mines (18 months overhaul), which result in shrinking of cobalt supply by about 5000 tonnes. Meanwhile, due to impact of Africa child labor incident and restriction of mining conditions, Congo, a country responsible for 50% of global cobalt supply, will shut down about 10000 tonnes of manual mine, overall speaking, according to conservative estimate, the supply will decrease by 15000 tonnes. This brings change in supply, and consequently transforms the supply-demand situation, it is expected the turning point will come in 2017.

Continual growth of cobalt demand: Cobalt is mainly used in hard alloy, and lithium battery industries, in the global context, about 44% cobalt is used in lithium battery, in China’s cobalt demand, lithium battery accounts for up to 76%, the development of China’s new energy automobile exerts obvious boosting effect on cobalt demand. Judging from data of past 5 years, overall speaking cobalt demand maintained annual 7.4% growth each year. In lithium battery, cobalt is mainly used at the anode of 3C battery and power battery (ternary). Driven by steady growing sales of smart phones, 3C battery part still maintains about 10% growth. In the aspect of power battery for new energy automobile, although ternary power battery only accounts for low percentage (27% in power battery), as the requirements of passenger vehicles for driving mileage improves, ternary battery will rise in usage percentage, so as to become one of the main growth points for cobalt demand.