China's Huayou Cobalt to reduce cobalt smelting, recycling lines at Quzhou plant

Zhejiang Huayou Cobalt Co., Ltd. has cut part of the cobalt smelting and recycling lines temporarily at its Quzhou plant in China's Zhejiang province as of March 17, due to a lack of raw material supply and labor employment caused by the control measures to stop the spread of coronavirus, the company said in a statement March 18.

The output reduction will be a short-term measure for epidemic prevention and will not have any adverse impact on the company's performance in the long term, Huayou said. The company didn't disclose when the production will be resumed.

"It's a sign that companies are struggling with the sky-high prices of recycled materials, as Huayou's Quzhou plant focuses on recycling," said one Chinese trader.

"While production is slowing down, so is demand. The industry is just quite sluggish at the moment," said an international trader, adding that factories are producing less so that their inventories can last longer, because there is almost no spot intermediate supply right now.

Huayou Cobalt, as one of China's largest cobalt producers and processors, produced cobalt products of 18,309 mt in the first half of 2021, up 26% from a year earlier, the company's interim report showed.

China's cobalt hydroxide and sulfate prices will likely stay at elevated levels in the near term in view of the high raw materials price and the supply tightness in domestic market, market sources said.

High cobalt prices

Chinese cobalt sulfate prices remained elevated on the back of increasing raw materials prices, though demand has been dampened by surging nickel prices.

S&P Global Commodity Insights assessed daily battery-grade 20.50% Co cobalt sulfate at Yuan 120,000/mt ($18,865/mt) DDP China March 18, unchanged from March 9, in the Platts Market on Close assessment process.

High cobalt prices and uncertainty in the nickel markets could see nickel-cobalt-manganese (NCM) battery chemistries lose favor in the domestic Chinese market, as manufacturers struggle to cope with increasing cost pressure, market sources said.