SunSirs: Changing Supply-Demand Landscape Spurs Upgrading of Cobalt Industrial Chain

As of August 25th, the semi-annual reports of the four major listed companies in the cobalt industry chain have all been disclosed. Among them, Zhejiang Huayou Cobalt Co., Ltd. (hereinafter referred to as "Huayou Cobalt") achieved a revenue of 55.568 billion RMB in the first half of the year, a year-on-year increase of 49.39%; the net profit attributable to parent company was 3.507 billion RMB, a year-on-year increase of 29.38%. Shengtun Mining Group Co., Ltd. (hereinafter referred to as "Shengtun Mining") recorded a revenue of 19.264 billion RMB in the first half of the year, a year-on-year increase of 39.56%, and the net profit attributable to parent company was 1.804 billion RMB, a year-on-year increase of 71.37%. Ganzhou Tengyuan Cobalt New Materials Co., Ltd. (hereinafter referred to as "Tengyuan Cobalt") had a revenue of 6.089 billion RMB in the first half of the year, a year-on-year increase of 72.36%, and the net profit attributable to parent company was 881 million RMB, a year-on-year increase of 87.82%. Nanjing Hanrui Cobalt Co., Ltd. (hereinafter referred to as "Hanrui Cobalt") reported a revenue of 3.907 billion RMB in the first half of the year, a year-on-year increase of 23.32%, the net profit attributable to parent company was 98.6316 million RMB, a year-on-year decrease of 22.50%, and the non-net profit was 152 million RMB, a year-on-year increase of 44.56%.

Performance divergence among cobalt industry chain companies in the first half of the year: resource-based enterprises have stronger profitability; the profitability of smelting enterprises depends on raw material costs and product structure; leading integrated enterprises drive growth by relying on precursors and cathode materials, while the room for volume growth in traditional cobalt businesses is limited," said an industry insider who requested anonymity.

Enterprises Accelerate the Layout of Recycling Production Lines

Global cobalt resources are highly concentrated in the Democratic Republic of the Congo (DRC). At the beginning of this year, the DRC set the total annual export quota for cobalt at only 96,600 tons for the two years from 2026 to 2027. Coupled with the implementation of policies on concentrate export control and on-site deep processing, tight raw material supply has become a normal state of the industry.

The rigid constraints on the supply side have directly pushed up the central price level of cobalt products, and the profit distribution pattern of the industrial chain has changed accordingly. The previous domestic model where the smelting link earned processing fees has been gradually broken. Integrated enterprises that hold overseas mine equity and adapt to local in-depth processing policies can obtain stable intermediate product supply and take the initiative in the game of raw materials; while enterprises that solely rely on purchasing concentrated mineral externally not only face pressure on raw material procurement costs but also encounter multiple uncertainties such as quotas, logistics and approval, resulting in a further compression of their living space.

To get rid of the over-reliance on a single primary ore, the strategic value of power battery recycling and the comprehensive utilization of copper-cobalt tailings has rapidly become prominent. The recycled cobalt produced by the disassembly and recycling of decommissioned power batteries is becoming an important second raw material source. Many enterprises are accelerating the layout of recycling production lines, closing the loop of "battery disassembly—hydrometallurgical purification—lithium battery material remanufacturing", and supplementing the gap of primary ores through renewable resources to reduce the dependence on overseas ore sources.

For example, Tengyuan Cobalt adheres to the parallel development of primary ore and secondary resources, continuously expands the production capacity of battery black powder treatment, builds a supply cooperation network covering battery factories, crushing enterprises and waste material traders, and constructs an industrial internal cycle of "product sales - waste material recycling - material remanufacturing - customer introduction". The recovered cobalt salts and cobalt tetroxide can be directly supplied to the lithium battery and high-end electronic supply chains, and the proportion of recycled raw materials in feeding is continuously increasing, so as to hedge the purchasing pressure of overseas concentrated ore.

Huayou Cobalt leverages its full-industrial-chain advantages to build a model of "decentralized recycling network at the front end + centralized smelting and recycling at the back end". It is simultaneously constructing domestic production lines with compliant recycling qualifications and recycling channels in multiple overseas countries, exploring the standardized import of cross-border recycled black powder, directly using recycled cobalt in the production of ternary precursors, and realizing the closed-loop conversion of waste materials into high-end lithium battery materials.

According to data from Shanghai Metals Network, China's recycled cobalt supply is expected to reach 45,000 to 50,000 metal tons in 2026, which can meet about 35% of the country's refined cobalt consumption demand. The raw materials come from retired power batteries, black powder from waste 3C batteries and industrial waste from the industrial chain, effectively making up for the gap in overseas primary cobalt supply.

Changes in Demand Structure

In addition to the changes on the supply side, the demand structure of China's cobalt industry in the first half of the year was also different from that of previous years. The elimination of low-end homogeneous production capacity has accelerated, and high-end new energy lithium battery materials and the secondary recycling of cobalt resources have gradually replaced traditional 3C cobalt material businesses, becoming the core driving force for the growth of the industry.

The previous widespread concern about the trend of "low-cobaltization" and "cobalt-free" in power batteries has not led to a shrinkage in demand for the cobalt industry. Instead, it has forced the entire industrial chain to accelerate structural transformation and upgrading, driving the industry to shift from the traditional cyclical track to the track of high-end new energy materials, and the resilience of industrial development has continued to improve.

Industry demand shows an obvious structural differentiation pattern. In the traditional 3C consumer electronics sector, cobalt demand continues to face pressure; cobalt lithium oxide materials are gradually being replaced by ternary blended solutions, and currently only high-end 3C products still maintain a stable high cobalt consumption demand." The above-mentioned industry insider said that relying on the upgrade of battery capacity and the steady expansion of the overall installed scale of new energy vehicles, the total cobalt demand in the power battery sector has always maintained steady resilience, effectively offsetting the downward pressure on demand in traditional sectors.

The effectiveness of the diversified and integrated layouts of multiple listed companies has continued to stand out. By optimizing product structures and improving resource layouts, they have effectively smoothed the risks of fluctuations in the industry cycle and achieved steady growth in operating performance.

For example, Huayou Cobalt achieved steady growth in both revenue and net profit in the first half of the year. During the reporting period, affected by factors such as supply constraints of upstream raw materials and weak demand in the downstream 3C market, the shipment volume of the company's traditional cobalt products decreased year on year. However, the company's high-end new energy material business achieved explosive growth and successfully completed the iterative upgrading of its core business.

Zhu Keli, Founding President of the China Institute for New Economic Research, told reporters: "In the future, the traditional single advantage of short-term mineral mining and resource hoarding will no longer be the core competitive barrier for enterprises in the cobalt industry chain. The integrated operation capacity of the entire industrial chain, the R&D technology of high-end new materials, and the integration capacity of both primary and recycled resources have become the core factors determining the long-term development potential of enterprises and their discourse power in the industry.

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