Cobalt prices rise and fall in a dynamic cycle, and the inventory level is an important logic line for tracking. Cobalt is a small metal with great price elasticity. From the rise and fall history of the past 15 years, two complete cycles of rise and fall have been accompanied by significant changes in cobalt inventories. Tracking inventory level is an important clue to judge the rise and fall of cobalt price. After more than a year of unilateral decline, the inventory center of cobalt has returned to the supply side. After excluding the reasonable inventory in all links, the net inventory of middlemen is about 1000 tons, the net inventory of cathode material factory is basically zero, and the supply side has accumulated more than 30000 tons of cobalt inventory. The extremely low inventory in the downstream is an important sign of the bottoming of cobalt prices, and a catalyst is needed to guide the reversal of price trends.

Glencore shut down mutanda to regulate global cobalt supply, leaving a gap in cobalt supply in the next three years. Glencore shutdownMutanda copper cobalt oreIt is an important catalyst for the reversal of cobalt supply and demand and the rebound of cobalt prices. In the case of low cobalt prices, Glencore lowered the 2019 cobalt production guideline to 43000 tons, and plans to shut down the mutanda copper cobalt mine with an annual output of 27000 tons by the end of the year. There is no cobalt ore on the supply side that can meet the 27000 ton gap, and the shutdown of mutanda undoubtedly gives the market a firm lock-in expectation. We predict that the total cobalt supply in the next three years will be reduced to 13.67/14.6/162100 tons, respectively, 1.66/3.77/0.88 million tons less than the original expectation. On the demand side, the demand for power batteries has not changed significantly, and the 3C field is expected to have an average annual increase of 4500 tons of cobalt demand due to the early popularization of 5g. It is expected that the supply-demand balance of cobalt will reverse from 2019 to 2021, with supply gaps of 0.2/0.77/0.92 million tons respectively.

From the supply side to the consumption side, the cobalt warehouse is transferred in the price rise. Glencore's mining stoppage stimulated cobalt to stop falling and rebound, and the opening of the downstream cathode material factory to replenish inventory was the driving factor for the long-term upward trend of cobalt prices. In the process of cobalt price rise, the cathode material factory will gradually increase the reasonable inventory and net inventory level. It is expected that the supply side inventory will drop to 20100 tons in the next three years, which is basically equal to the reasonable inventory level of 18000 tons in the upstream. The inventory level of more than 33000 tons was transferred to the downstream, of which the supply gap was 19000 tons, the reasonable inventory was 9000 tons, and the downstream surplus inventory was 5000 tons.

The rise of cobalt price improves the profitability of the industrial chain, and the upstream flexibility is the largest. Since Glencore news stimulated, MB price has continued to rise to about $18 / pound, and the upstream gross profit margin has recovered. According to estimates, when the cobalt price rises to $23 / pound, the profits of the industrial chain will obviously shift upstream,cathode materialAnd the gross profit per ton of the above links increased, among which the mining and smelting and precursor links increased the most, and the gross profit per ton of cathode material increased less than the increase of cobalt price, which will drive the cathode material factory to increase the inventory level in the process of cobalt price rise, and use low-cost inventory to offset the adverse effects of cobalt price rise, so as to obtain a higher profit level.

We believe that Glencore's regulatory effect will exceed expectations. The rise in cobalt prices in the next three years is a deterministic event, and it is recommended to fully configure the cobalt industry chain. Among them, the upstream mining and smelting links are the most elastic.



Source: Battery China