Cobalt market is turbulent - Resource Overlord, Canon can fight each other

In the history of international finance, there are always some resource countries that have become the center of capital competition in a certain period of time due to the amazing performance of a certain type of mineral price. This time, it is the cobalt of the Congo (Gold).

Congo (gold) mining New Deal uplift cobalt market waves

In the Katanga province at the southern end of the Congo (Golden), on the ore belt extending from the southeast to the northwest, the world's well-known copper and cobalt enterprises are gathered together. The more northwest, the more copper and cobalt associated ore, the more large mines.

The abundant copper and cobalt resources are tempting for international miners, including international miners such as Glencore, Luoyang Molybdenum and Eurasian Resources Group. But this year, metal investments in this region are no longer as "comfortable" as they were before.

Congo (Golden), the main source of global cobalt supply, accounts for more than 65% of the world's total supply. Recently, the new mining law passed by the country has set off a wave of global cobalt.

According to the Congo (Golden) New Mines Act, once cobalt is classified as a “strategic material”, its royalty rate will increase by a factor of 5 to 10%; and the protection rights of tenure owners who are protected from changes in fiscal and customs policies within 10 years are Cancellation, the new upgrade royalty rate will be applied to all projects and will take effect immediately. In addition, the new mining law also introduced a so-called excess profit tax with a tax rate of 50%, and the mining rights tax rate including copper, cobalt and gold will be raised.

As soon as this news came out, companies such as Glencore, which were earned in this round of cobalt bull market, called on the Congolese government to reduce the royalties of bulk commodities.

According to statistics, since the end of 2015, the domestic metal cobalt price has fluctuated upwards as a whole, and the increase has exceeded 230%. The current price has exceeded the high point of nearly 10 years.

Looking back at the metal market in the past two years, the more people bet on the subject of small metal price increases, the more they are envied. As the price of cobalt continues to rise, the giants and predators who have profited in this round of cobalt market have surfaced. Among them, the news that a certain domestic market in the city of Daxie was invested in “Waterloo” two years ago due to the sputum and cobalt was just lace news. The international miner Glencore, which has 30% control over the global cobalt market, is the real vulture in this round of games.

Glencore's "left and right hand" business

According to some statistics, half of the world's most abundant cobalt mines are in the hands of Glencore. According to statistics, as the world's largest cobalt mine producer, Glencore has a total of 28,300 tons of cobalt raw materials in 2016, accounting for 23% of the total global cobalt mine production.

Rome was not built in a day. Among the 2.0207 million tons of cobalt reserves owned by Glencore, some of the minerals are a staggering gain, including Katanga Mining, which was acquired during the 2008 financial crisis.

At that time, Katanga Mining Company fell into a desperate situation due to the drop in international copper prices. In the absence of borrowing everywhere, it was forced to “sell” to Glencore for $500 million. After the subsequent overweight acquisition, Glencore currently owns more than 85% of the company's shares. And the company's market value quickly recovered in just a few years. From the $1.3 billion market value at the time of the acquisition to the current $4 billion, in the "Katanga" campaign, Glencore cannot help but be the darling of the lucky god.

"If the above story is 'Cobalt has made Glencore', then the new version of the cobalt city last year, may be mainly around the 'Geneng how to achieve cobalt' this main line." Industry insiders said.

According to reports, in early 2017, a company called Cobalt27 was established in Toronto, Canada, mainly engaged in the trading of metal cobalt and the acquisition of cobalt mineral property rights. In the first year of listing, the company's share price soared 600%. On the eve of Christmas last year, the company's cobalt trade in the international market directly increased the international cobalt price by 10% on the second day.

Industry insiders speculate that the company's major shareholder and Glencore are also from Switzerland, so it may be a "vest" of Glencore, and as the biggest beneficiary of the rise in cobalt prices, Glencore can control the spot source. While controlling derivatives trading, you can make huge profits in the right and left fights.

At the beginning of this round of cobalt price increase, Glencore has a cobalt production of about 62 million pounds. In the past two years, the price of cobalt has risen by more than 30 US dollars per pound.

How long can the cobalt price fly?

Why does Glencore have a rise in cobalt prices?

Cobalt is mainly a by-product of copper and nickel. Currently, 60% of the global cobalt mine production comes from copper-cobalt ores, and 34% comes from nickel-cobalt ore. The supply of cobalt depends to a large extent on copper and nickel projects. Global refined cobalt production increased from 35,600 metal tons in 2000 to 120,000 metal tons in 2017, with a compound annual growth rate of about 7%. In the same period, China's refined cobalt production increased from 1,000 tons to 70,000 tons.

Founder Securities Nonferrous Research team pointed out that behind the rise in cobalt prices is the change in its supply and demand structure. In the context of the new energy vehicle cycle, the demand for power batteries has triggered explosive growth in demand for cobalt, while cobalt demand in the 3C sector has maintained steady growth. Secondly, it is difficult for the supply side to keep up with the growth of demand in the short term, resulting in an imbalance between supply and demand. The supply and demand gap is expected to be 550 tons in 2017, and the gap is expanding. It is expected that the supply gap will reach 12,000 tons in 2020.

The team explained that at the supply end, the copper and nickel associated properties of cobalt constrained the supply elasticity of short-term cobalt; secondly, the harsh environment of Congo (Golden) increased the difficulty, cost and time of mining new mines; Most of the mines have reached full production status. In the future, there are only Rtang projects of Katanga mine and Eurasian resources with clear production and expansion plans. It is estimated that by 2020, the global supply of refined cobalt will be 122,000 tons.

According to industry insiders, Glencore, Luoyang Molybdenum (Tenke Mine), Eurasian Resources ENRC, the world's top three cobalt miners, produce 40% of global cobalt production. At present, the production capacity of most of the main mines has been basically released, the potential for increasing production is limited, and the overall supply growth rate is limited.

On the demand side, the demand for cobalt triggered by the new energy vehicle power battery is growing rapidly. It is expected that under the process of high nickel and low cobaltization, by 2020, the demand for cobalt in power batteries will still reach 33,000 tons.

“Overall, including Glencore, Luoyang Molybdenum, Eurasian Resources Group, Minmetals Resources and Ivanhoe Mines, companies operating mines and propulsion projects in Congo will immediately apply to copper, cobalt and gold. When the metal has a higher mine tax, there is also a newly introduced so-called windfall tax of up to 50%. The increase in tax burden will discourage the enthusiasm of the miners to produce.” Founder Securities Nonferrous Research team pointed out that Congo (Gold) As the world's largest cobalt resource country, the local government has already controlled metal cobalt through policy changes. Whether it is from the perspective of mining costs or from the policy stability faced by mining companies, the new taxation policy is mainly disturbing the supply, which is conducive to the upward price of cobalt.

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