CMOC cobalt production soars by 178% in H1 2024, straining an already oversupplied market

Chinese mining giant CMOC reported a 178% year-on-year increase in cobalt metal production for the first six months of 2024, according to an announcement by the company on Friday July 12

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The company produced 54,024 tonnes of cobalt metal during this period, reaching in merely six months 83% of its projected annual output guidance of 60,000-70,000 tonnes set at the beginning of the year.

The expansion of CMOC’s TFM mine and increased monthly outputs at the KFM mines in the Democratic Republic of Congo (DRC) contributed to the production surge, setting a record high for its half-year period production, and amounting to 97% of the total annual production of 2023.

Such significant production volumes have exacerbated pressures in an already oversupplied market, sources told Fastmarkets.

“The [production] numbers are crazy, there’s not much the market can do to digest those volumes at the moment,” a European trader said.

Fastmarkets’ daily price assessment of cobalt hydroxide 30% Co min, cif China was $6.40-6.60 per lb on Monday July 15, unchanged from the previous session, but the price has fallen in three sessions from $6.50-6.80 per lb since the beginning of July.

Since the beginning of 2024, cobalt hydroxide prices have been under consistent downward pressure. The midpoint hydroxide price averaged $6.98 per lb in the first half of 2024, down by 18.8% from the $8.60 per lb during the same period in 2023.

With cobalt primarily being of a byproduct nature, found during copper and nickel mining, supply cutbacks in the face of low cobalt prices has been difficult.

Copper prices have been elevated this year, breaking through the $11,000-per-tonne mark at one point, which has incentivized production to continue.

CMOC’s copper metal production in the first six months of 2024 was 313,788 tonnes, up by 101% from a year earlier, reaching 58% of the production guidance midpoint and 75% of the annual copper production in 2023.

Participants expressed concerns that the excess of supply will further add sluggishness to the market conditions.

“I do not see cobalt prices rising much until the end of 2024, unless CMOC decides to stockpile or cut production,” a second cobalt trader said.

“I don’t understand why they are doing that level of production; it’s having consequences for the long-term market,” a third cobalt trader said.

A fourth trader agreed, saying: “It is impossible to consume such a large supply, as demand is even lower than before. The oversupply and weak prices might even persist for years.”

CMOC has set production goals in its five-year development plan, aiming to achieve an annual output of between 90,000 and 100,000 tonnes of cobalt metal by 2028, as stated in its 2023 annual report.

But that five-year objective could well be achieved this year, should current production rates continue.

With such large volumes of cobalt facing the market for the foreseeable future, cobalt sulfate and cobalt metal prices have also seen large declines.

Cobalt sulfate prices have begun the second half of the year hitting the lowest level on record. After breaking below 30,000 yuan ($4,136) per tonne on June 26, liquidity has continued to decline with buyers seeking lower prices.

Fastmarkets’ latest twice-weekly price assessment for cobalt sulfate, 20.5% Co basis, ex-works China was 28,500-29,000 yuan per tonne on July 12, unchanged from the previous assessment on July 10. This is down from 32,000-32,500 yuan per tonne on January 3.

Cobalt metal prices have hit eight-year lows with the market struggling to navigate the rapid ramp-up in supply availability.

Fastmarkets’ daily price assessment for cobalt standard grade, in-whs Rotterdam was at $11.30-13.00 per lb on Monday July 15, down from $11.30-13.05 per lb on July 12. The price was assessed at $12.80-14.10 per lb on January 4. 

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