Cobalt - Supply and Demand Reconstruction, Industry Reversal

The wave of 5G replacement and the rapid increase in the volume of electric vehicles will drive the demand for the cobalt industry. We estimate that the cobalt market size in 2019/2020/2021 will be 12/13.4/144,000 tons, and the compound growth rate of demand in the cobalt industry in the next five years will be 8%. 3C and EV are still the main factors driving the growth of cobalt demand in the future. ①Consumer batteries (3C) use the highest proportion of cobalt, reaching 46% in 2018. The 3C field will usher in a wave of 5G phone replacements from 2020 to 2021. The increase in the charging capacity of a single mobile phone will greatly increase the demand for 3C cobalt. We predict that 2020- The compound growth rate of cobalt used in 3C is expected to reach 7% in 2025; ② the proportion of cobalt used in EVs will reach 12% in 2018, and the compound growth rate will be 18% in the next five years, making it the fastest growing sub-sector.

Supply Reconstruction - Big mines closed, new projects are lower than expected.

① Jia Nengke announced that it will suspend the production of Mutanda, the world's largest cobalt mine, from the end of 2019 to 2021, which will affect the supply of about 25,000 tons of cobalt per year from 2020 to 2021, accounting for 17% of the global cobalt supply, resulting in a sharp reduction in the supply of the cobalt industry.

②The biggest addition in the cobalt industry The supply and commissioning of production is less than expected. Glencore’s other cobalt project KCC (prospective 30,000 tons capacity) and Eurasian Resources RTR project (14,000 tons in the first phase and 20,000 tons in the second phase) will be the largest supply growth in the next 1-3 years. capacity, but we both saw that the capacity of the two projects was lower than expected in the first half of 2019.

③ Grab the mine and shrink it In 2018, the DRC hand-held mine supplied about 30,000 tons. However, due to the bottoming out of cobalt prices, all the profits of the hand-held mine industry chain were forced out. In 2019, the hand-held mine activity declined significantly. It is expected that the supply of hand-held mines will shrink by more than 10,000 tons. . It is estimated that the supply of the cobalt industry in 2020-2021 will be 131/143,000 tons, and there will be a supply-demand gap of 3,000 tons/1,000 tons, and the industry will reverse.

Be optimistic about cobalt prices and pay attention to the inventory cycle: Supply and demand will reverse, and there will be a gap in the cobalt industry in 2020-2021. If the 5G replacement wave and EV resonance bring demand The growth exceeded expectations, and it is optimistic that the price of cobalt will rise to 350,000 / ton in the next year. At present, the inventory of cobalt products in the downstream of the whole industry chain is relatively small, and the destocking cycle has entered the end. In the electric vehicle industry chain, from Congo cobalt mines - cobalt salt production enterprises - cathode materials - battery factories - electric vehicles, the normal flow cycle of the entire cobalt is close to 6 months, and the fluctuation of the overall inventory cycle is very obvious for short-term demand. Cobalt prices are expected to rise, and we continue to pay attention to the replenishment of downstream companies.

Cobalt industry supply and demand restructuring, industry reversal, increase holdings: Huayou Cobalt Industry, Hanrui Cobalt Industry.

Risk warning: The growth rate of new energy vehicles is lower than expected.

             Cobalt: Supply and Demand Reconstruction, Industry Reversal