Reports from earlier this week suggest that China’s SRB is set to purchase considerable amounts of the blue metal.

China’s SRB is expected to buy as much as 5,600t of cobalt metal. The volume is higher than the 2,000t initially reported after additional offers from suppliers prompted the SRB to take more brands of the metal, according to media reports. These may include non-Chinese brands.

The move could help bring about some price recovery. Prices, as reported by Asian Metal, trended up this week, but remain down ~30% y-o-y as a result of supply- and demand-side factors. 

On the supply side, Project Blue estimates that there is somewhere in the region of 40kt of cobalt in hydroxide overhanging the market at present, with some key producers (such as Glencore) able to increase output considerably if desired, and with some major DRC projects set to enter production over the short-to-medium term. Meanwhile, the huge ramp-up of Indonesian HPAL continues to add more cobalt intermediate units, contained in MHP, to the market. On the demand side, lower-than-expected demand (mainly in China) weighed on prices in H1. 

Owing to minor logistics issues in the DRC, and a slight pickup in demand, prices recovered a little in late June, having fallen below US$16/lb in China in early May according to Asian Metal. Payables have also picked up a little. Project Blue continues to consider this level a likely price floor and with SRB stockpiling now an additional factor, we expect some upside in prices.  

While cobalt’s intermediates market is significantly oversupplied, the refined market should perhaps be characterised as only “comfortably supplied. Global refined supply reached a new peak in 2022 and with 73% of global supply, China was the driving force. Production reached 133kt last year according to Project Blue data, a 32% y-o-y increase. Leading producers Huayou and GEM both increased output, as did a number of smaller players. Metal production in China was up 65% y-o-y as refiners ramped-up supply after cutbacks in 2021, while new capacity was also commissioned by Tengyuan and Greatpower. 

SRB purchasing will see the Chinese National Food and Strategic Reserves Administration take advantage of low prices to boost its stockpiles while providing support to domestic players.