Cobalt prices fell, but the results of the three domestic cobalt giants in the first half of the year bucked the trend and turned positive.

As of now, the three domestic cobalt giants Huayou Cobalt (603799.SH), Hanrui Cobalt (300618.SZ), and China Molybdenum (603993.SH) have all released their semi-annual reports. .

According to the financial report, Huayou Cobalt achieved revenue of 9.052 billion yuan in the first half of the year, a year-on-year decrease of 0.57%; net profit attributable to the parent company was 350 million yuan, a sharp increase of 965.28% year-on-year, ranking among the three major cobalt companies. head.

According to analysis by CITIC Securities, Huayou Cobalt’s sales of copper products and ternary products increased in the first half of the year, but sales of cobalt products declined, resulting in a slight year-on-year decrease in its revenue.

In the first half of the year, Huayou Cobalt’s gross profit reached 1.32 billion yuan, a year-on-year increase of 20%. CITIC Securities said this was mainly due to the increase in gross profits from copper products and ternary products.

Among them, the gross profit of copper products reached 680 million yuan, a year-on-year increase of 33.9%, accounting for 52% of the total gross profit, and is the main force contributing to Huayou Cobalt's gross profit.

In addition, the cost of Huayou's cobalt products in the first half of the year was 186,000 yuan/ton, a year-on-year decrease of 10.4%, resulting in a gross profit per ton of cobalt products of 32,000 yuan/ton, a year-on-year increase of 19.2%.

Hanrui Cobalt (300618.SZ), another major cobalt giant, had revenue in the first half of the year of 1.036 billion yuan, a year-on-year increase of 12.32%; net profit attributable to the parent company was 61.9711 million yuan, a year-on-year increase of 180.98%.

According to the analysis of Changjiang Securities, the cost reduction of cobalt products and the significant increase in the volume of copper products are the core factors for the company's surge in performance.

In the first half of the year, Hanrui Cobalt digested the high-priced cobalt inventory in 2019, reducing its operating costs by 18.6% year-on-year and increasing its gross profit margin by 12.56%.

In addition, Hanrui Cobalt's copper project in the Democratic Republic of the Congo was put into production, and the electrolytic copper project in Kolwechi reached production, driving the growth of copper production.

During the same period, China Molybdenum, the world's second largest cobalt producer, achieved operating income of 46.7 billion yuan, a year-on-year increase of 368%; net profit attributable to parent companies was 1.008 billion yuan, a year-on-year increase of 24.7%.

Among the three major cobalt giants, China Molybdenum achieved the largest net profit in the first half of the year, but the smallest year-on-year increase.

In the first half of the year, the copper output of China Molybdenum's Congo (DRC) TFM copper and cobalt business increased by 2.8%, the phosphorus output in Brazil increased by 4%, and the niobium metal output increased by 17%.

China Molybdenum said that the increase in product output, cost reduction and efficiency improvement in various business segments, and new metal trade were the reasons for the sharp increase in revenue in the first half of the year.

In July 2019, China Molybdenum completed the acquisition of metal trader Aikesen, thus increasing its metal trading business.

The financial report shows that in the first half of the year, the production and operation costs of various mining business segments of China Molybdenum decreased by more than 1 billion yuan year-on-year.

Among the revenue segments of Huayou Cobalt and Hanrui Cobalt, the cobalt industry accounts for 30.13% and 76.64% respectively; China Molybdenum's copper and cobalt products account for 12.13% of its revenue.

It can be seen that, except for Hanrui Cobalt, which is highly dependent on the cobalt industry, the largest revenue of China Molybdenum and Huayou Cobalt is not in the cobalt industry.

According to the financial report, Huayou Cobalt’s largest revenue comes from new materials and trading business, accounting for 45.77%; China Molybdenum’s largest source of revenue is refined metal trading, accounting for 51.5%.

China Molybdenum’s financial report shows that due to the impact of the COVID-19 epidemic, the market price of cobalt products fluctuated and declined in the first half of this year. The average price of standard-grade cobalt in the British Metal Herald was US$15.67/pound, a year-on-year decrease of 5%.

Since March, cases of COVID-19 infection have appeared in the Democratic Republic of the Congo, and the worsening epidemic in South Africa has led to a country lockdown, which has affected the export of cobalt raw materials.

Zhang Xinyue, deputy editor of S&P Global Platts Asian Metals Market, told Jiemian News that the epidemic has accelerated market concerns for a certain period of time, leading to an increase in cobalt raw material prices.

Taking battery-grade cobalt sulfate as an example, the factory price including tax in China in January was 41,000-42,000 yuan/ton, and rose to a high of 57,000 yuan/ton in March, an increase of 40%.

But since then, the market found that cobalt raw materials were not as tight as imagined, and demand was not enough to support the high price, and the price fell back to 42,000 yuan/ton.

Zhongtai Securities believes that cobalt prices may continue to rise due to the closure of the Mutanda mine in Congo (DRC) by Glencore, the world's largest cobalt supplier, and the slowdown in corporate capital expenditures.

"Due to the uncertainty of upstream supply, prices fluctuate greatly." Zhang Xinyue said,

Zhang Xinyue said that due to a new round of concerns about supply, as well as concerns about September and Cobalt prices have risen again since July in anticipation of improved demand in October. Since July, cobalt powder has increased by 14%.

The downstream demand for cobalt is concentrated in the battery industry, including power batteries and 3C digital batteries.

Zhongtai Securities analysis believes that as the resumption of work and production progresses, the downstream demand side gradually recovers, and new energy vehicles and smartphones are expected to see a recovery increase in the second half of the year.

However, Zhang Xinyue reminded that, taking cobalt hydroxide as an example, there is speculation and arbitrage in the market, and its price fluctuates greatly, with certain risks and uncertainties.

Among the revenue segments of the three giants in the cobalt industry, copper is also one of the main sources of income.

The copper business of Huayou Cobalt and Hanrui Cobalt accounted for 13.97% and 23.27% of their revenue respectively; the copper and gold related products of China Molybdenum accounted for 1.93% of the revenue.

Since mid-March this year, international copper prices have soared. As of now, the London copper price has reached US$6,677/ton, an increase of more than 40% from US$4,608.5/ton during the epidemic panic in March. However, the average price in the first half of the year fell by 7.8% year-on-year.

Essence Securities analysis believes that considering the accelerated progress of vaccine development, which is expected to further lift the epidemic suppression, coupled with the implementation of fiscal policies in Europe and the United States in the fourth quarter and the maintenance of loose monetary policies, the copper industry is expected to usher in a new wave in the fourth quarter. Replenishment during peak season.

In addition, the supply of copper mines has entered an era of low-speed growth, and the decline in processing fees has suppressed copper smelting capacity. Copper prices are expected to continue to rebound significantly.