Cobalt, it's really crazy!

 

Recently, nickel has attracted a lot of attention in the capital markets, but in fact, there is another metal that has long gone crazy, that is, cobalt.

Although cobalt prices in March were much slower than those in January and February, the overall trend is still at a high level, according to historical data from the Yangtze River Nonferrous Metals Network. As of March 31, the average spot price of cobalt in the Yangtze River was 563000 yuan / ton, up 13000 yuan, or 2.36%, from 550000 yuan / ton on February 28. The highest point of the month is 578000 yuan / ton on March 8 and March 14, and the lowest point is 549000 yuan / ton on March 1.

Fragile supply chain.

Cobalt is a very rare small metal resource and an important national strategic resource.

The abundance of cobalt in the earth's crust is extremely low. According to USGS statistics, the global land remaining proven reserves are about 7 million tons, of which the Democratic Republic of the Congo (DRC) reserves account for 35%, Australia reserves about 17%, and China reserves only 80, 000 tons, accounting for 1%. Nearly 83% of global cobalt resources are located in subsea iron-manganese-cobalt nodules and crusts in the Atlantic, Pacific and Indian Oceans. at present, there is no economic mining solution, and the current natural cobalt supply depends only on land resources.

In terms of resource quality, the highest quality mineral belt available for mining in the world is located in the Central African copper belt, in which Mutanda, Tenke Fungurume and other deposit areas have obvious advantages in associated cobalt grade and total resources. In terms of total resources and economic value, the global cobalt supply will depend on the Congo for a long time.

More than 60% of the global cobalt supply comes from the Democratic Republic of the Congo (DRC), while the production of cobalt in the DRC is highly concentrated in large copper and cobalt mines such as Katanga, Mutanda and TFM, and the long-term supply of cobalt is controlled by leading suppliers such as Glencore and Luoyang Molybdenum Industry.

In 2018, the total supply volume of the world's top five suppliers was 75200 tons, with CR5 as high as 57%.

Headquartered in Barr, Switzerland, Glencore is the world's largest commodity trader, mainly engaged in the production and marketing of metal minerals, energy products and agricultural products.

 

Almost all of the Congolese cobalt concentrate is exported to China, but Chinese cobalt concentrate imports have fallen sharply in recent years as most Chinese importers prefer cobalt intermediate products. In 2020, the physical import volume of China's cobalt concentrate was about 52900 tons, equivalent to about 3940 metal tons, down 41.7 percent from the same period last year. From January to September this year, the physical import volume of China's cobalt concentrate was about 12700 tons, equivalent to 955 metal tons, down 70.9 percent from the same period last year.

Africa is the first region for Chinese mining companies to enter overseas, among which a number of Chinese mining companies are carrying out mining development in the Democratic Republic of the Congo (DRC) copper-cobalt ore belt. The rapid development of Chinese enterprises in the DRC has formed a talent gathering effect, which has led to the development of local supporting industries such as project contracting, equipment and material supply, trade and logistics.

According to the estimates of the Organization for Economic Cooperation and Development (OECD), eight of the 14 largest cobalt mining companies in the Democratic Republic of the Congo are Chinese enterprises, accounting for almost half of the output of the Democratic Republic of the Congo.

Although a number of Chinese enterprises have acquired mining areas to build crude refineries in the Congo to stabilize the supply of raw materials, the domestic bargaining is still weak under the oligarch pricing attribute, and the cobalt price is easy to be overvalued under the situation that supply falls short of demand.

Cobalt prices have risen and fallen sharply in recent years. The first round of rise started at the end of 2006. Cobalt prices continued to rise from US $20 / lb to US $52.5 / lb in March 2008, with a cumulative increase of 162.5%. Prices fell back quickly after reaching their peak, quickly giving up gains and falling to a low of $12 / lb in the following nine months; the second rally began at $13.85 / lb at the end of 2016 and then peaked at $44 / lb in a 1.5-year upward cycle. then prices fell back quickly as in the previous cycle, returning to $14.25 / lb again in March 2019.

Lithium battery spawns a new recovery cycle.

Cobalt and lithium batteries are closely related. 5G mobile phones usher in the first year of promotion in 2020, and the new performance attracts consumers to change their phones ahead of time, thus increasing sales in the mobile phone market. at the same time, the demand for 5G high-performance battery capacity increases the carrying capacity of a single machine by 20%. Drive the increase of cobalt content in a single machine. By 2025, the average carrying capacity of each mobile phone is expected to exceed 18Wh, driving the consumption of lithium cobalt oxide cathode materials to 68500 tons, equivalent to 41200 tons of cobalt, with an annual compound growth rate of 6.8 percent.

Compared with the 3C field, the power battery of new energy vehicles is a larger incremental market in the future.

Antaike estimates that 3C lithium electricity accounts for 36% of the global cobalt consumption structure in 2021, power batteries account for 31%, superalloy and cemented carbide account for 7% respectively, and in China's cobalt consumption structure in 2021, 3C lithium electricity accounts for 56%. Power batteries account for 31%, cemented carbide 4%, ceramics 3%, and superalloys 2%.

The growth rate of iron lithium is significantly higher than that of Sanyuan this year, partly because of the excessive pursuit of energy density in the previous market, the installed share of iron lithium is too low and is now ushering in normal repair. On the other hand, with the soaring price of upstream raw materials, lithium iron phosphate has a certain cost advantage over ternary lithium. With the outbreak of the superimposed energy storage market, the demand for lithium iron battery is expected to continue to increase.

There is no need to be pessimistic about ternary. Lithium iron phosphate has a cost advantage over ternary lithium, often only considering the initial purchase cost, while ignoring that ternary lithium has higher recovery value. After recovery, the recovery value of cobalt and nickel is significantly higher than that of iron and phosphorus, and the residual value of ternary battery is higher than that of lithium iron phosphate. Considering the whole life cycle, ternary lithium has no cost disadvantage compared with lithium iron phosphate.

With the acceleration of the trend of the new energy car industry, the demand for ternary batteries will continue to grow by more than 40% in the next 3-5 years. Cobalt still has a strong market demand, while the layout of cobalt resources of Chinese enterprises in the Democratic Republic of the Congo and Indonesia is worth looking forward to.

Luoyang Molybdenum has an indirect 80 per cent stake in the TFM copper-cobalt mine, which covers an area of more than 1500 square kilometers and has a full set of processes and processes from mining to processing, with the main products being cathode copper and cobalt hydroxide.

TFM overcame the adverse effects of the epidemic in the first half of last year. The 10K project officially entered the trial production phase in July. The daily ore capacity increased from 15000t/d to 25000t/d, and it was successfully put into full-load production at the end of September. In addition, with the steady progress of the electrowinning workshop expansion project in the second half of the year, copper and cobalt production capacity will further increase. It is estimated that by the end of the year, the copper production capacity will reach 250000 tons / year, and the cobalt metal production capacity will reach 25000 tons / year.

Huayou Cobalt Co., Ltd., through its wholly-owned subsidiary Huaqing Company, contributed US $151 million, accounting for 57% of the shares, and established Huayue Nickel-Cobalt Co., Ltd., a joint venture with Luoyang Molybdenum wholly-owned subsidiaries Wo Yuan Holdings, Qingchuang International, Hualong Company and LONGSINCERE, which is responsible for directly promoting the project. At a time of industrial acceleration, the progress of all aspects of the company's integrated link is clear, and the improvement of precursor volume, technology and profit per ton is clear. In the first half of the year, the output is 31000 tons, and the total production capacity of YOY+138%, is 55000 tons.

Congo Matte, a subsidiary of Hanrui Cobalt Industry, was established in 2007 in the Democratic Republic of the Congo (DRC). More than a decade of stable operation has not only brought stable mining channels to Congo Matte, but also brought huge cost advantages to the company. Maite Mining Plant has formed an annual production capacity of 4000 tons of cobalt concentrate, 5000 tons of crude cobalt hydroxide, 10000 tons of electrolytic copper and 12000 tons of sulfuric acid, and completed the independent raw material guarantee system of Hanrui cobalt industry chain.

Based on the above reasons, a number of institutions are more optimistic about the future trend of cobalt prices. Citic Securities believes that continued supply constraints make it impossible for cobalt prices to fall sharply in 2022, and the cobalt price center is expected to operate at more than 450000 yuan / ton in 2022, more than 20 percent higher than the average price in 2021. Minsheng Securities pointed out that