Quarterly Report – February 2020

Last year’s fourth quarter began with a buoyant nickel market, mainly due to Chinese-run Tsingshan buying between 30,000 and 80,000 tonnes ahead of the Indonesian ban. The second half of the quarter saw a slowdown in demand for superalloys and, simultaneously, nickel dropped around 20%, hand in hand with nickel stocks doubling from November to December. The LME nickel cash average for the final quarter of 2019 was US$ 15,450 per tonne, with the monthly average falling from US$ 17,113 in October to US$ 13,800 in December.

These developments reflected a myriad of political issues, predominantly the uncertainty created by the US/China trade war, the slowdown in the Chinese economy, Brexit and industry constraints coming from the Boeing 737 Max delays.

Cobalt has risen since Glencore announced the closure of its Mutanda mine in Democratic Republic of Congo (DRC), with the fourth quarter LME cash average of US$ 34,450 per tonne representing an increase of around 15% over that for the previous quarter; the monthly LME average slipped from US$ 34,920 per tonne in October last year to US$ 33,800 in December.

There is higher demand for cobalt in electric vehicles while the European roll-out of 5G promises increased demand for new smartphones and thus a greater cobalt requirement. The DRC government has also announced plans to take control of the artisanal cobalt sector and to implement safety and pricing regulations. Therefore, the outlook for cobalt continues to be positive.

Demand for superalloy scrap was sluggish going into the fourth quarter, with inventory levels being reduced and the impact of the Boeing 737 Max delays starting to be felt. Steelworks and other smelters were reluctant to buy high-grade nickel and cobalt scrap during the last quarter.

The situation changed only a little in January, so we must hope for a recovery at the end of this quarter. Meanwhile, the coronavirus is affecting the global economy and its uncertain course makes forecasting more difficult.