SunSirs: Logistics Disruption may Stimulate Cobalt Prices Soaring

China's domestic cobalt price rises again

Last week, the cobalt market did not continue its upward trend. Cobalt prices have fluctuated and adjusted since July 7, and the rise of cobalt prices has slowed down. On July 13, the cobalt market ushered in another turning point, and cobalt prices skyrocketed again. As of July 16, the cobalt price was 376,333.34 yuan/ton, an increase of 5,200 yuan/ton, or 1.39%, from the 371,166.66 yuan/ton cobalt price on July 13. In the short-term cobalt price continues to rise, where will the cobalt market go?

South African riots disrupted logistics

The arrest of former South African President Zuma triggered multiple protests and riots. On July 12 (Monday), protesters launched a large-scale nationwide protest demonstration in South Africa, and the situation further escalated danger. On the evening of the 13th local time, a spokesperson for the South African Police Department stated that the protests had spread in many provinces in South Africa. On July 14, South Africa reported again that the protests had led to the closure of multiple ports in KwaZulu-Natal. The highway from KwaZulu-Natal to various parts of South Africa was disrupted. Among them, the port of Durban, South Africa's import and export hub and one of the busiest shipping terminals on the African continent, has been brought to a standstill because of this protest, but the protest seems to continue to spread.

Due to the riots caused by the protests in South Africa, some shipping companies in Durban Port issued force majeure letters saying that they would temporarily suspend operations, and since the time of force majeure cannot be confirmed for how long it will last, the re-operation time is yet to be determined. According to a notice issued by Maersk, a large number of warehouses in the interior of Durban have been closed. The Durban port terminal is in a stagnant state due to lack of staff and equipment. Logistics providers have suspended services, which has caused import and export interruptions. The logistics interruption in South Africa will inevitably affect the transportation of cobalt raw materials, and the transportation of cobalt raw materials is restricted, which will stimulate the rise of cobalt prices.

Market summary

Congo (DRC) is the most landlocked Democratic Republic of the Congo, where most of the cobalt is mined in the world. It mainly transports cobalt through neighboring African ports (mainly including the Port of Durban in South Africa and the Port of Dar es Salaam in Tanzania). . The unrest in South Africa caused the Port of Durban to become stagnant, and the recovery time is yet to be determined.

As one of the most important cobalt raw material transportation ports, the stagnation of Durban Port will inevitably lead to a sharp drop in the short-term export of cobalt raw materials, and the tight supply of cobalt raw materials will stimulate the rise of cobalt prices. Due to the long shipping time period, the shipping time from South Africa to China is about 1.5-2 months, and there will be no shortage of supply in the domestic cobalt market in the short term. With the continuous development of the unrest in South Africa and the continuous development of the epidemic, the risk of shortage of cobalt raw materials has increased. At the same time, the unrest in South Africa has stimulated the search for transportation routes outside of South Africa. The overall risk of supply shortages in the cobalt market is limited. Generally speaking, the short-term logistics interruption in South Africa increases the risk of cobalt raw material supply shortage, and the price of cobalt may soar in the short term; the long-term cobalt raw material supply shortage risk is relatively small, the logistics and transportation costs increase, and the cobalt price is expected to fluctuate slightly.

Related listed companies: Huayou Cobalt (603799), Hanrui Cobalt (300618), Luoyang Molybdenum (603993).

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