Arbitrage window boosts China’s imports of cobalt metal in March

“The rise in cobalt metal imports in March was mainly driven by the arbitrage window opened since January,” one Chinese trader told Fastmarkets.

Fastmarkets’ benchmark price assessment of cobalt standard grade, in-whs Rotterdam was $15.80-16.75 per lb on Friday April 21, widening downward by $0.40 per lb from $16.20-16.75 per lb one day earlier.

Fastmarkets’ assessment of cobalt 99.8% Co min, ex-works China was 250,000-300,000 yuan ($36,271-43,526) per tonne on Friday, down by 5,000 yuan per tonne from 255,000-305,000 yuan per tonne two days earlier.

The arbitrage window opened in January, when international cobalt metal prices averaged $18.51-20.33 per lb, a discount of $1.58-1.86 per lb to China’s cobalt metal monthly average prices of about $20.09-22.19 per lb in the same month, according to Fastmarkets’ pricing archive.

In addition, tight spot supply in China in previous months also increased the country’s need to import the metal, Fastmarkets heard.

China’s cobalt metal prices started rising in mid-February, supported by tight spot availability, with some Chinese cobalt producers purchasing spot material from the international market to fulfill their long-term agreements.

But the upward momentum halted in mid-March, with Chinese cobalt metal producers having more availability of spot supply amid persistently weak demand.

“Demand for cobalt metal from the magnetic sector in China has shrunk by 30% as of late, compared with the normal level of previous years,” a second Chinese trader said.

Market participants noted that consumers of cobalt metal were only purchasing spot material on a hand-to-mouth basis and that sluggishness may persist in the near term.

Increased cobalt supply expectations dampen buying sentiment

The expectation of increasing supply in the near term has further weighed on market sentiment.

Last week, mining company China Molybdenum Co (CMOC) announced it had reached a consensus with state-owned miner Gécamines on royalties. As a result, the majority of market participants expect an oversupply of intermediate products such as cobalt hydroxide, if the ban on CMOC’s exports of cobalt from the Democratic Republic of Congo is lifted soon.

But multiple sources told Fastmarkets that several Chinese cobalt refineries plan to ramp up their existing cobalt metal production or to start producing the metal from the second half of the year.

“The majority of the new output will flood into the domestic market since most of the brands are not accepted by the international market. This will create more downward pressure on Chinese cobalt metal prices, with demand expected to remain weak,” a third Chinese trader said.

China removed its import tariff on cobalt metal at the start of 2023.

Keep updated with the latest news and insights on our cobalt market page.