Chinese cobalt refiner and battery materials producer, Huayou Cobalt, recently released a plan to raise up to ¥6.25Bn (US$878.2M) through the non-public issuance of shares. The plan will only be valid after approvals from the Board and China Securities Regulatory Commission (CSRC).
In addition to adding ¥1.65Bn (US$231.8M) to operating cash flow, the capital raised will be used, mainly, for the construction of three projects:
1) ¥3Bn (US$421.5M) for construction of a 45ktpy nickel-in-matte capacity facility in the Weda Bay Industrial Park, Indonesia;
2) ¥1.3Bn (US$182.6M) for construction of an additional 50ktpy nickel-rich NCM cathode precursor capacity in Quzhou, China;
3) ¥300M (US$42.1M) to build a new R&D centre in Quzhou, China, focusing on cost reduction and green smelting, new Li-ion battery cathode/precursor materials, and closed-loop Li-ion battery recycling.
With an annual production capacity of nearly 30kt cobalt, Huayou Cobalt is one of the top cobalt producers in the world, providing refined cobalt products for various Li-ion battery applications in China and abroad. However, the profit margin contributed by its cobalt business has plunged since 2018, as cobalt prices have fallen from over US$37.0/lb to below US$17.0/lb in 2019 and into 2020. Given the price downturn and increased sustainability concerns in the cobalt supply chain, Huayou Cobalt has stepped back from new investment in the DRC and also decided to halt purchasing any cobalt from the ASM (artisanal and small-scale mining) miners in the country, which have historically provided an important feedstock source for its cobalt production.
Conversely, Huayou’s nickel business has grown to become a new profit contributor as the company continues to diversify its business portfolio through building up its captive nickel-to-battery supply chain. Since late 2018, Huayou has started to invest heavily in nickel projects in Indonesia, with joint venture partners including Tsingshan, CMOC and Chengtun Mining, securing primary feedstocks including MHP (mixed hydroxide precipitate) and matte. Downstream, the company is also actively ramping up nickel refining and Li-ion cathode precursor production capacity in China, targeting 30ktpy nickel-in-sulphate and over 150ktpy NCM (nickel-cobalt-manganese) precursor materials by 2023.
More nickel-focused strategies from major cobalt producers like Huayou suggest that the long-term outlook for nickel in batteries (mostly nickel sulphate) remains strong, despite recent headwinds from competing nickel-free battery technologies like LFP (lithium iron phosphate). The future for cobalt, however, looks increasingly challenging, as the trend towards reducing the use of cobalt in batteries is set to continue because of cost and risk concerns from downstream consumers.
Roskill’s NEW Nickel Sulphate: Outlook to 2029, 3rd Edition report was published in May 2020, providing a deep-dive analysis on market fundamentals with a 10-year forecast and quarterly updates keeping pace with industry developments. For more information or to subscribe, click here. A new edition of Roskill’s cobalt report will be published later this year.