Battery chemical markets have faced a turbulent ride through 2024, with a downturn in lithium prices coupled with cobalt metal prices falling to and staying at eight-year lows.
Slowing electric vehicle (EV) demand growth against a back-drop of an upsurge in cobalt supply has tapered sentiment to a new normal for prices. It’s important to understand the present fundamentals behind price movements, while also casting an eye to what the future holds.
Ahead of LME week, Fastmarkets has launched a new short-term forecast for cobalt sulfate. As the closest cobalt product to the EV battery industry, cobalt sulfate sentiment can be a strong indicator of Chinese supply and demand.
Cobalt sulfate is a chemical used in EV battery production and is derived from cobalt hydroxide, cobalt metal and more recently mixed-hydroxide-precipitate (MHP). MHP is mainly produced in Indonesia using high-pressure acid leaching (HPAL) plants and is labelled as a “ready-made product” for EV battery production because of its high nickel, cobalt and lithium content.
Weak cobalt hydroxide prices and a persistent oversupply have weighed on cobalt metal and chemical prices. The pres-ence of MHP, albeit in smaller volumes, as a feed for sulfate production has affected the cobalt sulfate market due to its cheaper availability compared with cobalt hydroxide.
Indonesia has emerged as a major source of cobalt in recent years and is forecast to account for 10% of global cobalt sup-ply in 2024, growing from 7% last year according to Fastmarkets’ research.
With sulfate prices at six-year lows, over the summer period this year, some producers have sold their supplies of cobalt hydroxide to bring in cashflow. High smelter production costs and quiet downstream demand have disincentivised sulfate production for some.
The cobalt sulfate market looks to the downstream market for precursor market for demand, with producers comment-ing that sustained weakness has affected business operations. Precursor materials are the intermediate ingredients e.g. mixed oxide into which sulfate is converted and from which battery cathodes are made.
“Demand for cobalt sulfate from the downstream precursor sector remains weak. Most buyers keep pressing down cobalt sulfate prices and are unwilling to accept higher prices. Though the production schedule in the downstream precursor market has improved, competition has been very fierce with pricing wars, which also curbs [any rise in] cobalt sulfate prices,” a cobalt market participant said.
Since the start of 2024, cobalt sulfate prices have shown continued weakness, averaging 31,480-32,237 yuan per tonne for the first half of the year. This is a 21.5% decrease compared with the corresponding period in 2023, when prices averaged 39,084-40,268 yuan per tonne.
Some sulfate producers in China have reduced production or altered existing manufacturing lines to produce cobalt metal or cobalt chloride instead to achieve better returns. This is due to tight margins for most, and especially for non-integrated operations, which often produce at a parity cost level or at a loss on occasion.
Utilisation rates on Chinese cobalt sulfate lines have trended lower through 2024, averaging 34% in June. By contrast, the consumer electronics sector, the second largest end-user of cobalt chemicals, has fared better ahead of the launch of new smartphone models. Chinese production of cobalt tetroxide, the feed material for consumer electronics batteries, grew 17% month on month in June.
We have already cut our cobalt sulfate production by 50% due to the price weakness,” one producer said.
Cobalt sulfate prices have typically traded close to the China metal price. Between January 2019 and April 2022, cobalt sulfate prices averaged 7,400 yuan per tonne lower on a metal basis. But since May 2022, when price levels first began to diverge, cobalt sulfate prices have averaged 70,000 yuan per tonne lower than the metal market.
The challenging market conditions and weaker-than-normal pricing highlights the need for the market to have visibility on future fundamentals within the cobalt sulfate market.
Cobalt is primarily produced as a byproduct of copper and nickel mining. High copper prices in the first half of the year have encouraged expansion in mining capacities.
As a result, copper-cobalt producers have been incentivized to keep production high despite the low cobalt price environment. The global cobalt market is expected to be oversupplied by 23,000 tonnes in 2024, according to Fastmarkets research.
The largest cobalt producer, CMOC, reported a 178% year-on-year increase in production at 54,024 tonnes for the first six months of 2024. On a monthly average basis, the mid-point of Fastmarkets’ cobalt metal standard grade was at $11.40 per lb in August 2024, vs $16.37 per lb in August 2023.
In the past five years, the DRC’s footprint in the global copper supply chain has grown: in 2019 the country accounted for 7% of global mined copper supply. In 2023, the country over-took Peru as the second largest global producer, and in 2024 it is forecast to supply 12% of global mined units, according to Fastmarkets’ research.
Strong imports of cobalt intermediates into China have led to increased availability amid quiet downstream demand, pressuring prices across the intermediates market. China represents a key hub for cobalt refining and accounted for 78% of global cobalt refining in 2023, with this figure forecast to rise to 81% in 2024, according to Fastmarkets research.
Chinese imports of cobalt intermediates totaled 300,685 tonnes in the first half of 2024, up from 177,390 tonnes over the same period in 2023.
Cobalt refiners in China have traditionally used imported cobalt hydroxide from the DRC as feed. From April 2021, the first volumes of cobalt in MHP began arriving in China from Indonesia, growing significantly in the past 3 years.
Cobalt imports in MHP made up 12% of the total cobalt units entering China in the first half of 2024.
China will remain the major cobalt refiner over the course of the next decade, according to Fastmarkets’ forecasts. Europe as a region is the second largest producer of cobalt sulfate, with major sites in Finland like Jervois Global’s Kokkola and Nornickel’s Harjavalta.
There is currently no operational cobalt sulfate capacity in the United States, but several projects are moving through the development stages . North America’s first cobalt sulfate will likely come from Canada with the start-up of Electra Battery Material’s refinery in Ontario.
Long permitting waits and the low-priced cobalt environment, as well as high costs amid inflationary pressures have slowed progress at assets like Jervois’ Idaho Cobalt Operation, with the company waiting for higher prices or further government support before continuing development.
In the US, financial incentives provided by government departments like the Department of Defense (DOD) and the Department of Energy (DOE) have helped companies secure the necessary funding required to begin development.
In Europe, expansion plans at Jervois’ Kokkola site have been placed on hold amid the challenge of slowing cobalt sulfate demand in Western markets.
The company is also weighing the benefit of locating a refinery in the US to ensure applicability of its material under the 30D tax credit, which is part of the IRA.
Fastmarkets’ short-term forecast for cobalt sulfate will help track and analyze the development of EV supply chains in Asian and Western markets to give subscribers confidence and insight into the energy transition.
By Fastmarket senior price reporter Alex Cook, price reporter Sahil Shaw and analyst Robert Searle
Visit fastmarkets.com/battery-materials or email sdr@fastmarkets.com for more cobalt sulfate insights, as well as Fastmarkets battery raw materials price data, analysis and events.
