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Cobalt materials can not be put in a corner. High prices are double-edged sword. Power battery manufacturers look for other materials to replace them. Under the general trend of power battery ternary and high nickel, the proportion of NCM622 and NCM811/NCA in ternary materials has increased year by year. Battery cell factories will actively apply positive materials such as nickel manganese cobalt and nickel cobalt aluminum, increase the use of nickel metal, and the proportion of cobalt metal will gradually decrease. Ningde Times and others have announced that the company plans to reduce the demand for cobalt metal next year, but will increase the use of nickel.

The "wild wind" of the cobalt industry under the high cobalt price continues.

On August 29, both Hanrui Cobalt and Huayou Cobalt released their semi annual reports. Although the cobalt price began to fall slightly in May, the overall cobalt price rose sharply in the first half of the year, directly boosting the gross profit margin growth of the two companies.

In recent years, the demand for cobalt has increased greatly, pushing up the price of cobalt. At the same time, the trend of high nickel is also shaking the position of "Cobalt Master".

Xu Aidong, secretary-general of the Cobalt Branch of China Nonferrous Metals Industry Association, said in an interview with reporters that although high nickel and low cobalt are the trend, in the short term, high nickel technology is not yet mature, cobalt demand still exists, and after falling back, prices are expected to stabilize and rebound slightly.

Sustained growth

In the first half of 2018, Hanrui Cobalt achieved an operating revenue of 1.502 billion yuan, a year-on-year increase of 204.42%, and a net profit of 529 million yuan, which has exceeded the annual net profit of 2017, with a year-on-year increase of 288.97%.

In the first half of 2018, Huayou Cobalt achieved a revenue of 6.78 billion yuan, a year-on-year increase of 79.05%, a net profit attributable to the parent of 1.507 billion yuan, a year-on-year increase of 125.5%, and a net profit attributable to the parent of 1.502 billion yuan after deducting non profits, a year-on-year increase of 125.50%.

Hanrui Cobalt said that the rapid growth of the company's performance in the first half of the year was mainly due to the high price operation of MB (the quotation of metal cobalt in the British Metal Herald) and the production capacity. By product, the revenue of cobalt business was 1.332 billion yuan, a year-on-year increase of 236%, and the gross profit margin was 59.54%, a year-on-year increase of 11.72 percentage points.

In March this year, Hanrui Cobalt Co., Ltd. made a quantitative analysis of the company's operating performance on the change of cobalt price with sensitivity analysis method, and pointed out that if the MB cobalt price rose by 5%, the company's gross margin would increase by 8.84%.

In addition to the price, in 2017, Hanrui Cobalt's 5000 ton metal cobalt hydroxide production line in Mette, Congo, was completed and put into operation, and its cobalt salt production capacity was released.

The performance growth of Huayou Cobalt is also closely related to the rising sales prices of cobalt, copper and ternary precursors. Among them, the demand for ternary power batteries has driven the production and sales of ternary precursors to increase. During the reporting period, 6988 tons of ternary precursors were produced, up 90% year on year; 6383 tons of ternary precursors were sold, up 225% year on year, and significant progress was made in the market development of ternary precursors.

It can be seen that the sales growth of Huayou Cobalt is actually greater than the output growth. It can also be seen from its inventory that the company is actively de stocking and reducing the purchase of bulk raw materials.

From the book balance of the total inventory, it increased from 4.833 billion at the beginning of the period to 6.4 billion yuan, mainly in the inventory of goods, rapidly increasing from 863 million to 1.7 billion yuan. Huayou Cobalt pointed out that this was due to the rise in raw material prices and the corresponding increase in inventory due to the increase in production and sales.

In contrast, the book value of raw material inventory increased from 3.28 billion to 4.013 billion, an increase of about 21% year on year, which is far less than the increase of commodity inventory.

However, in terms of inventory, Hanrui Cobalt has gone through the opposite path. During the period of sharp rise in cobalt price, it has increased its raw material reserves in a timely and substantial manner to obtain the income from the rise in cobalt price.

The inventory of Hanrui Cobalt includes raw materials, products in process, goods in stock, revolving materials, materials in transit and materials for entrusted processing. The book balance of inventories at the end of the semi annual report in 2018 was RMB 1.375 billion, up 157% year on year, and also increased significantly compared with RMB 916 million at the beginning of the period. From the perspective of inventory structure, the growth is mainly in the raw materials sector. At the beginning of the period, the book balance of the Company's raw materials was RMB 598 million, accounting for 65.26%. At the end of the period, the book balance of the Company's raw materials was RMB 1 billion, accounting for 72.72%. On the contrary, the proportion of book balance of inventory goods decreased by nearly two percentage points.

The "hoarding" of raw materials by Hanrui Cobalt also seems to be preparing for the continuous improvement of production capacity. This year, Ganzhou Hanrui plans to build a new metal cobalt material project with an annual output of 10000 tons and a ternary precursor project with an annual output of 26000 tons, which will be constructed in two phases. The first phase is a cobalt smelting production line for cobalt series products. The first phase is planned to reach the production capacity by 2020, which will greatly improve the company's cobalt salt production and processing capacity.

Xu Aidong told the reporter that the stock price did not respond so obviously to such performance. Behind this was that the market believed that there was inventory in hand. If the current raw materials were used to calculate the income, there would be no such good profit, but the low price inventory in the past.

"The Congo production capacity of Hanrui Cobalt has not come up yet, and it has been hoarding goods since last year. In fact, the market also hopes that big companies can hold up the price and suggest them to buy electric cobalt, but Hanrui Cobalt feels that it is more practical to directly purchase raw materials." Xu Aidong said that such short-term investment needs to be viewed dialectically. Some investors will think that technical barriers are more valuable.

Effect of High Nickel and Low Cobalt

However, it is worth noting that the cobalt price has also entered a downward channel after a sustained surge.

In 2017, the price of cobalt metal rose by 114%. In the first half of 2018, the price of cobalt metal rose first and then fell. In the first quarter, the price of cobalt continued to rise. The price of MB low-grade metal cobalt rose from 35 dollars/pound to 43.7 dollars/pound at the end of April. In May, the cobalt price began to fall. By the end of June, the price of MB low-grade metal cobalt had dropped to 39.7 dollars/pound, and further dropped to 34.95 dollars/pound at the end of July. At present, the price of MB low-grade cobalt has declined slightly to 33-33.70 dollars/pound, and the decline has slowed down significantly.

Xu Aidong said that the domestic cobalt price has rebounded slightly recently, especially the electric cobalt. However, in terms of cobalt salt, because some enterprises are still producing cobalt salt made of waste materials, and cobalt salt is greatly affected by the shortage of funds in the industrial chain, the price has not rebounded significantly.

"In the traditional peak consumption season from September to October, the cobalt price can recover somewhat, but it is still affected by the shortage of funds in the industrial chain, so it is not easy to stock up a lot of stocks. The cobalt price is expected to stabilize and rebound slightly, but it may not rebound significantly." Xu Aidong said.

Cobalt cannot be put in a corner. High price is a double-edged sword. Power battery manufacturers look for other materials to replace it. Under the general trend of power battery ternary and high nickel, the proportion of NCM622 and NCM811/NCA in ternary materials has increased year by year. Battery cell factories will actively apply positive materials such as nickel manganese cobalt and nickel cobalt aluminum, increase the use of nickel metal, and the proportion of cobalt metal will gradually decrease. Ningde Times and others have announced that the company plans to reduce the demand for cobalt metal next year, but will increase the use of nickel.

Xu Aidong said that although the trend of high nickel and low cobalt was a trend, it was not so fast for the time being. In addition, the enterprise itself is aware of this future development direction and is making some layout, such as Huayou Cobalt, which has also made certain layout in nickel, and the market will actively adapt.

"If we keep the status of capital driving the rise of cobalt price, this kind of substitution will progress faster. After the rational decline of cobalt price for a period of time, it may also ease the pace of blindly pushing up nickel batteries in the downstream. For example, NCM811 is not so mature at present." Xu Aidong believes that different materials will correspond to different grades of cars in the future. It is impossible for one technology to occupy the entire automobile industry, but the raw materials will certainly change.

In terms of materials, there is a shortage of domestic raw materials. The external dependence of lithium is 76%, that of cobalt is 97%, and that of nickel is 86%. Affected by the supply of cobalt ore, the upstream raw materials have become a battleground for military strategists. In addition to the promotion of the power battery recycling policy, Huayou Cobalt and others have started to recycle the three-way power batteries in advance. Hanrui Cobalt also intends to increase its cooperation with battery plants, enhance the company's ability to recover waste ternary batteries, and obtain more metal cobalt resources.

Due to the high content of cobalt value, its secondary recycling rate is relatively high. The proportion of global recycled materials in the supply is 11% - 30%, and that of domestic materials is about 10%. In the future, as the life cycle of China's 3C products shortens and the ternary batteries of new energy vehicles enter the retirement period. Moreover, compared with 2016, the cobalt price has been at a high level. Compared with the previous year, under the same cost, the revenue of the cobalt resource recycling model is easier to be guaranteed.

According to the statistics of Antaike, the annual cobalt recovery in China is about 6000 tons, accounting for about half of the global cobalt recovery. From the perspective of the domestic recycling leader of recycled cobalt, the annual recovery volume of Greene is kept at 3500 tons, and the output of recycled cobalt is relatively stable.

A senior manager of Huayou Recycling, a subsidiary of Huayou Cobalt, told the reporter that the traditional material enterprises have become more mature in hydrometallurgy, and there are conditions for recycling upstream. "At present, there is no harm in having one more channel, so raw materials need not be bought everywhere, and domestic urban mines are also resource channels".

However, he pointed out that at present, the market share of each company is small. Taking Huayou Cycle as an example, it is still in the running in period with the OEMs. In addition, because there are not many retired power batteries, and there are not many recycled enterprises, it is possible to form a certain scale of competition until 2020 when power batteries really usher in the trend of retirement.

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