Wheres can this UPI article be found that everyone keeps referring to??
The Drudge report times out.
Cobalt Q2 Review and Future Outlook
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An excellent summary of Q2 and forecast
Please read carefully especially what's ahead - happy accumulating those quality Cobalt stocks now
Common theme amongst analysts remain - bullish on Cobalt
"...Rawles also mentioned that towards the end of Q3 and running into Q4 will be when the annual supply contract negotiation season really starts to heat up. “I think this will be an important time for deciding prices for 2019.”
https://investingnews.com/daily/res...esting/cobalt-investing/cobalt-market-update/
Cobalt Market Update: Q2 2018 in Review
Priscila Barrera - July 13th, 2018
What happened to cobalt in Q2 2018? Our cobalt market update outlines key market developments and explores what could happen moving forward.
- lithium-ion batteries used to power electric vehicles (EVs), is expected to surge in the next few years.
Despite news from US carmaker Tesla (NASDAQ:TSLA) suggesting cobalt use in its batteries will be reduced to “almost nothing,” analysts remain optimistic about the future of the metal.
Read on to learn what happened in the cobalt market in Q2 2018, including the main supply and demand dynamics and what market participants are expecting for the rest of the year.
Cobalt market update: Supply and demand
During the second quarter of the year, cobalt continued to make news headlines around the world.
Most market developments came from the Democratic Republic of Congo (DRC), where most cobalt is mined.
In April, DRC state-owned miner Gecamines started legal proceedings to dissolve its Kamoto copper-cobalt operation with Glencore’s (LSE:GLEN) Katanga Mining (TSX:KAT).The dispute was resolved in June, but Glencore’s nightmares continued during the quarter.
“Katanga is one of the key new sources of supply for the cobalt market in the coming years and any disruption to its ramp up could cause the cobalt market to return to deficit in the coming years,” CRU Group senior analyst George Heppel said.
Also impacting the market and investor sentiment was the new DRC mining code, which will designate cobalt as a “strategic substance,” increasing royalties to 10 percent. An alliance of miners in the country has told the government that the DRC could lose US$3 billion in over 10 years if the legislation remains as it is.
In other DRC political news, the acquittal of Jean-Pierre Bemba by the International Criminal Court in The Hague came as a surprise to the market.
“It seems at this stage that he plans to return to DRC politics [but] to what extent is unknown,” said Benchmark Mineral Intelligence analyst Caspar Rawles, adding that Bemba has a strong following in the DRC, and potentially the power to unite what is a somewhat fragmented DRC opposition in the run up to the presidential election.
Looking over to demand, Tesla announced that they would reduce cobalt use in electric vehicle (EV) batteries to “almost nothing,” increasing investor’s concerns about future demand for the metal.
During the quarter, the battle between nickel and cobalt heated up, with many experts saying cobalt demand will continue to surge even if its content in batteries is reduced.
In recent months, there’s been much discussion around the possibility of lithium-ion batteries shifting to a 811 nickel-cobalt-manganese(NCM) cathode chemistry. That means eight parts nickel, one part cobalt and one part manganese.
“The impact of 811 on the lithium-ion battery cathode market is going to be minimal in the short term,” Benchmark Mineral Intelligence said in its latest report.
For his part, Jack Bedder, division manager at Roskill, expects cobalt consumption from the battery sector to increase from 53 percent of the total cobalt market last year to 55-56 percent this year.
Cobalt market update: Price performance in Q2
Looking over to prices, cobalt prices rose beyond most expectations throughout Q1, with the most rapid rises occurring in the final few weeks of the quarter.
LME cobalt metal prices started the year at US$75,000 per tonne and climbed 24 percent to end the first quarter at US$93,250. However, in the second quarter the market saw a correction, with prices ending down 16 percent at U$77,300 per tonne.
According to Rawles, the aggressive price rise the market saw in Q1 was somewhat unexpected, “not the fact that prices increased but the speed at which it happened,” he said.
“Conversely, my opinion is that the price correction we have seen in Q2 was expected by a reasonable portion of the market. So to some extent [cobalt] has performed in a way that was anticipated, but more so in Q2,” he added.
Rawles said that it is yet to be seen how far metal prices will fall, and with the summer slowdown starting now, it is unlikely that they will go back up until September, a month which is usually associated with increased activity.
In terms of the sulfate market, prices have fallen a little more, but have shown signs of stabilizing.
Rawles believes the bearish sentiment the market saw really come into play in China in April was somewhat of a surprise.
“In my opinion this isn’t necessarily a function of poor demand, but factors impacting buying patterns related to cash flow and credit,” he added.
Similarly, Heppel said the cobalt chemical market has performed as expected, though at an accelerated pace to original estimations.
“The drop in the cobalt price that we’ve seen over the past few months has been slightly sharper than we originally anticipated, mainly due to a faster-than-expected transition to metal production by several key refineries in China,” he explained.
Heppel added that prices have fallen more dramatically than originally expected due to an increase in cobalt metal tradeflow from China to Europe, as refineries get better netbacks by selling overseas than domestically.
“A lot of this has been difficult-to-trace material which naturally trades at a lower level in the market to traceable, guaranteed non-artisanal material, and this has also weighed on prices,” he said.
For Bedder, some sort of a small level of volatility around this level is expected depending on the amount of spot trade and the amount of factors impacting the market. “But prices have generally stayed at the level [Roskill] has expected and they will remain there for some months to come,” he added.
Looking ahead, Rawles said the short term outlook for prices is probably for downside pressure for both markets, metal and sulfate, but he is not expecting a crush, more likely a stabilization around the current levels.
“There appears to be some pent up buying interest in the market so when it’s clear the market has stabilized we might see a flurry of buying activity,” he added.
For his part, Heppel said Q3 is generally a quieter time in the European market due to seasonal effects, so thin trade activity will put a limit to downward price trajectory.
“Prices could potentially see some growth towards the end of the quarter as large aerospace firms return to the market for purchasing – these firms typically have much stricter requirements in terms of material traceability, and consequently pay a premium for that,” he explained.
Cobalt market update: What’s ahead?
As the third quarter begins, there are key factors and announcements that could impact the cobalt market.
For Heppel, aerospace will continue to be a major driver of cobalt metal demand in Europe and the USA.
“Expectations from the aerospace sector over the coming years are generally high, […] it will be interesting to see what the key announcements are from Rolls-Royce (LSE:RR), General Electric (NYSE:GE), Pratt & Whitney, British Airways and Airbus,” he added.
Another factor to watch will be the Chinese refiners’ capacity to switch between metal and chemical production, as they may decide to switch back to focusing on cobalt sulfate and oxide if domestic demand from the battery industry is high enough.
“This will largely depend on the trajectory of the Chinese auto sector, and I am interested to see over the coming months if Chinese consumers will accept electric vehicles on a large scale at this stage,” he added.
Similarly, Bedder mentioned Chinese capacity as a key factor to watch, but “the issue is going to be if there is going to be enough feedstock and that’s the real question for the cobalt market.”
“If the big projects that are expected to come on stream do so, Glencore’s Katanga project and ERG’s RTR project in the DRC, if they bring the hydroxide that they’re expected to into the market next year or the year after and the year after that, we should have enough feedstock until around the 2022-2023,” he said.
But after that, “the market will need to see more increases from existing producers that have great level of recycling and most importantly new projects entering the space,” Bedder added.
Additionally, a shortage of cobalt intermediates due to disruption in the DRC could result in strong upside potential for cobalt.
“However, there doesn’t seem to be much risk of disruption – politically or otherwise – over the coming months. But, it is worth continuing to keep a close eye on Glencore’s Katanga and ERG’s RTR, as any disruptions to the ramp-up of these two projects in particular could result in significant shortages of cobalt intermediate supply in the coming years,” Heppel said.
Similarly, Rawles said the likelihood of supply disruption is low, but it will be important to follow the subpoena issued by the US government to Glencore.
“With the majority of production located in the DRC (one of the countries the subpoena relates to) this could well impact the market in some way,” the expert added.
Rawles also mentioned that towards the end of Q3 and running into Q4 will be when the annual supply contract negotiation season really starts to heat up. “I think this will be an important time for deciding prices for 2019.”
Last year, “[the market] saw a big jump in the price basis used to derive cobalt intermediate pricing in contracts. It will be interesting to see how things unfold this year, and if producers look to demand similar high price levels,” he added.
Another key driver for the market, according to Rawles, will be if any large, long-term supply deals for raw materials are closed by cell or auto manufacturers, which can have an impact on pricing.
“Cobalt prices (particularly in China) can be driven by sentiment and a large deal or deals can have a big impact on the market,” he added. - lithium-ion batteries used to power electric vehicles (EVs), is expected to surge in the next few years.
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Announcement from ERM has made my day. :)
