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Cobalt hydroxide shipments from South Africa ongoing; concerns lift price sentiment: sources

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Cobalt hydroxide shipments from South Africa ongoing; concerns lift price sentiment: sources

Highlights

S Africa still allowing flow of goods through borders

Market worried about supply out of harder-hit DRC

Hydroxide prices rising, with values heard as high as $15/lb

London — Border restrictions in South Africa to curb the spread of the new strain of COVID-19 have not yet been extended to the movement of goods, and shipments are continuing unfettered, according to market sources, despite concerns about cobalt shipments from Africa to China.

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Cobalt hydroxide prices have been on the rise in recent weeks, with market sources citing strong demand in China due to low inventory levels heard at Chinese refineries, market tightness due to a lack of spot cobalt hydroxide material availability, a bullish outlook for Chinese electric vehicle production, and bullish sentiment due to China's State Reserve Bureau (SRB) tendering for a rumored 3,000 mt of cobalt metal.

Sources also said the coronavirus situation in South Africa and the Democratic Republic of Congo (DRC) had generally helped to bolster price sentiment, with concern over possible bottlenecks contributing and sustaining the current phenomenon of rising prices.

S&P Global Platts assessed 30% Co cobalt hydroxide at $13.55/lb CIF China on Jan. 7, 40 cents/lb higher week on week for spot cargoes aligned to Platts methodology, loading in 15-60 days. Prices have gained 65 cents/lb over their four-week bull run.

As concerns grew, prices were heard to be tradable as high as $15/lb on the afternoon of Jan. 12, as market participants grew more concerned about supply out of Africa.

In his Jan. 11 televised speech, South African president Cyril Ramaphosa had been expected to harden lockdown restrictions, but he announced that the country would remain on level three, with some additional restrictions imposed.

Ramaphosa said Jan. 11 that the Cabinet had decided to close the country's 20 land ports of entry until Feb. 15 for general entry and departure to "reduce congestion and the high risk of transmission." However, there were a number of exceptions, including the transportation of fuel, cargo and goods.

This means cobalt mined in the DRC can continue to be railed into South Africa and shipped out of the port of Durban, the main port used for cobalt hydroxide exports.

During South Africa's first COVID-19 wave in the second quarter of 2020, the government imposed a hard level five lockdown, which hindered and delayed the transport of cobalt for months thereafter, with exporters having to find alternate routes, such as the port of Dar-es-Salaam in Tanzania.

However, exporters complained that Dar-es-Salaam had warehousing difficulties and shipping capacity issues.

One European trader, whose company regularly exports cobalt from the DRC via the port of Durban, told Platts that, while he had heard that some Chinese buyers were concerned, his company had not experienced any issues.

"It might be that some ships are hard to come by if you do small volumes and maybe harder to come by than people are used to, but for us who do large volumes, it's easier to plan and we've had no issues," he said.

"Maybe some Chinese ports have turned away some ships from South Africa due to the new strain, but that's not really how the virus spreads... If South Africa does go into a hard lockdown again, I don't think it will shut down ports -- we know better now how the virus works and they can't afford to shut," the trader added.

A Chinese trader agreed that, "while there has been speculation about lockdown of barriers in South Africa, logistics [commodity] flows continue to operate as per normal, albeit potentially at a slower pace."

A buyer in Europe said he had also heard of concerns, although he had also not seen any noticeable impact on shipments.

"I don't exclude that some shipments are impacted, but it has been a hassle to stick to pre-announced sales schedules for a while now," he said. "At this point in time, I don't think there are serious concerns like in March/April last year."

He added that that most countries, including South Africa, were trying to keep their main businesses open, despite new waves of the virus, and rather restrict leisure activities.

Concerns about DRC

However, a second European trader said he had heard that shipments out of South Africa had been delayed by one month.

He chalked this up to a combination of issues, including unavailability of containers, COVID-19 restrictions and inevitable supply disruptions from the DRC due to the country being harder hit by the second wave of the virus.

A third European trader said people were concerned that supply disruptions in Africa were imminent, maybe not due to official restrictions in South Africa, but rather in the DRC.

"People think that supply out of Africa will be getting worse," he said. "Looking at South Africa, they are worried about more lockdowns, but the main problems are in the Congo. I heard that many mines have been affected as the country has been badly affected this time... they might shut borders... which will lead to truck delays."

To this end, buyers of cobalt hydroxide were trying to secure any cobalt hydroxide they could, which was boosting prices.

The first trader said he would rather think that there were issues on the Chinese port side, due to ports closing for the Lunar New Year holidays and skeleton crews perhaps not having the capacity to provide the special permissions required for cobalt, which was classified as dangerous goods.

Sources told Platts last week that shipments out of Durban were being hindered by a lack of container availability, with multiple southern Chinese ports set to close for the majority of January and February, complicating the other side of the journey.