CICC released a research report indicating that according to Business Society data, MB cobalt prices rose 58% and 6% during the periods of February 24 to June 20 and June 20 to September 18 respectively this year. The smaller price increase following the June cobalt export ban extension was primarily attributed to high cobalt inventory levels outside the Democratic Republic of Congo (DRC) and weak downstream demand during the off-season.
China's imports of cobalt raw materials from the DRC have continued to contract significantly. Should the cobalt export ban be extended again, the cobalt industry's supply may tighten further. On the demand side, according to SMM data, the capacity utilization rates for domestic ternary materials and lithium cobalt oxide increased by 1 percentage point and 5 percentage points month-over-month in August respectively. The tightening supply-demand dynamics are expected to drive cobalt price increases and inventory reduction. For investment targets, CICC recommends focusing on Zhejiang Huayou Cobalt Co.,Ltd. and Cmoc Group Limited.
**DRC Cobalt Export Ban Drives Price Recovery**
In late February, the DRC imposed a four-month cobalt export ban, leading to a strong rebound in cobalt prices from historical lows. After the export ban was extended for three months in June, price gains were more modest. CICC believes the smaller price increase following the June extension was mainly due to high cobalt inventory levels outside the DRC and weak downstream demand during the seasonal slowdown.
China's imports of cobalt raw materials from the DRC have continued to contract substantially. Given the long transportation cycle for DRC cobalt materials to reach China, imports from the DRC began declining sharply in June. According to customs data, China's cobalt raw material imports from the DRC decreased by 61%, 30%, and 64% month-over-month in June, July, and August respectively, with August imports representing only 9% of the 2024 monthly average.
**Improving Demand Outlook**
Improved demand expectations are likely to drive continued destocking of domestic cobalt inventories, supporting further cobalt price increases. According to SMM, as of September 19, domestic cobalt sulfate and cobalt tetroxide inventories declined by 17% and 3% respectively from their peak levels in late June, while electrolytic cobalt continues to accumulate inventory due to limited direct downstream applications.
On the demand side, August capacity utilization rates for domestic ternary materials and lithium cobalt oxide increased by 1 and 5 percentage points month-over-month respectively. The tightening supply-demand balance is expected to drive price increases and inventory reduction in the cobalt sector.
**Long-term Strategic Implications**
CICC notes that the DRC's cobalt export ban serves two main purposes: first, to boost cobalt prices and prevent strategic resources from flowing out at low prices; second, to enhance international influence through strategic resource control. The quota system currently being developed by the DRC government is expected to elevate the cobalt price center through supply control, ensuring long-term strategic benefits from its cobalt resources.
**Risk Factors**
Key risks include the DRC's volume control and price enhancement measures falling short of expectations, and downstream demand underperforming projections.
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