Summary of Cobalt Industry Conference Call Industry Overview - The cobalt industry is currently facing significant changes due to the Democratic Republic of Congo's (DRC) export quota system, which will be implemented on October 15, 2025, limiting exports to less than 50% of last year's production of 220,000 tons, resulting in an export quota of approximately 100,000 tons [1][2][3]. Key Points and Arguments - **Cobalt Price Trends**: Domestic spot cobalt prices have risen from 270,000 yuan to nearly 300,000 yuan, with expectations to reach 400,000 yuan, indicating a potential increase of 35% to 50% [2][3]. - **Supply Tightness**: The DRC's export ban will exacerbate global cobalt supply tightness, with the first shipments not expected to arrive in China until late January 2026. Industry inventory is projected to be fully consumed by the end of this year or early next year, maintaining high cobalt prices [1][3][4]. - **Production Declines**: In August, China's imports of cobalt intermediates dropped by 90% year-on-year, and domestic production of cobalt and cobalt sulfate also saw significant declines of 50% and 26% respectively [5]. - **Future Supply Expectations**: If the current steel and hardware policies continue into 2026-2027, cobalt supply will remain tight next year. The U.S. has announced a procurement of 7,500 tons of cobalt for strategic reserves, impacting metal demand significantly, although market reactions have been muted [6][7]. Investment Opportunities - **Recommended Companies**: Companies such as Huayou Cobalt and Liqin are favored due to their operations outside the DRC, benefiting from supply stability in Indonesia. DRC-related companies like Luoyang Molybdenum, Hanrui Cobalt, and Tengyuan Cobalt are expected to see performance improvements as prices rise [7][12]. - **Huayou Cobalt's Performance**: Huayou Cobalt has 180,000 tons of nickel production capacity in Indonesia, with expected shipments of 120,000 metal tons in the first half of 2025, translating to approximately 24,000 tons of cobalt production. The company is also positioned to benefit from inventory gains due to its significant cobalt salt production capacity [9][11]. Price Forecasts - **2025 and 2026 Price Expectations**: The average cobalt price for 2025 is expected to be around 200,000 yuan, while in 2026, prices are likely to exceed 300,000 yuan, with a potential increase of over 50% year-on-year [8][13]. Additional Insights - **Nickel Price Impact**: Current nickel prices are low, but potential closures of nickel plants in Indonesia could stimulate price increases, which would enhance company performance [10]. - **Overall Market Outlook**: The overall outlook for the cobalt market remains positive, particularly for Huayou Cobalt, with expectations of significant profit contributions from rising prices [13].

Core Viewpoint - The Chinese lithium battery industry is undergoing significant transformation, showing signs of recovery in revenue but still facing challenges in profitability due to intense market competition and debt accumulation [2][4]. Revenue and Growth - In the first half of 2025, over 100 listed Chinese lithium battery companies reported a combined "lithium battery business revenue" of approximately 537.995 billion yuan, marking a year-on-year growth of 14.95%, which is a 35.16 percentage point increase compared to the same period in 2024 [2]. - Despite the revenue growth, the overall gross profit margin for these companies was about 18.24%, a decrease of 1.22% year-on-year, indicating a decline in profitability across several sub-industries [2][3]. Market Competition and Industry Structure - The top 20 industry giants accounted for 68.29% of total revenue, 89.15% of net profit, and 89.22% of operating cash flow, highlighting a trend of resource and profit concentration among a few dominant players [3]. - The total liabilities of nearly 110 listed companies in the lithium battery industry reached 1.79 trillion yuan by mid-2025, an increase of 11.86% year-on-year, with a debt-to-asset ratio of 57.74% [3][4]. Financial Health and Risks - The net asset value of these companies was approximately 355.452 billion yuan, showing a year-on-year growth of 4.67%. However, excluding major players like CATL, the financial outlook for smaller companies appears bleak, with some reporting negative cash positions [4]. - By mid-2025, 15 companies in the energy storage sector had a debt-to-asset ratio exceeding 70% and negative net asset values, indicating significant financial stress [4]. Industry Outlook and Capacity Utilization - The global lithium-ion battery production capacity is projected to reach 4,315 GWh in 2024, with an expected shipment volume of 1,545 GWh, resulting in a capacity utilization rate of only 36% [5]. - By 2025, production capacity is anticipated to grow to 5,732 GWh, while shipment volumes are expected to reach 1,899.3 GWh, suggesting a severe overcapacity issue in the lithium battery industry [5]. Price Trends and Competitive Landscape - Following a decline in lithium carbonate prices, lithium battery prices have also decreased, with significant price drops observed in various battery types. As of July 25, 2025, the prices for different battery types were below their production costs, indicating a price war driven by excess capacity [6]. - The industry is expected to favor companies that demonstrate technological breakthroughs, sustainable innovation, and strong financial health to navigate through the current challenges [7]. Competitive Rankings - The "Top 50 Most Competitive Chinese Lithium Battery Companies" list highlights key players based on various metrics, including revenue growth, net profit, and innovation capabilities, with CATL leading the rankings [12][26].

Investment Rating - The report maintains a "Buy" recommendation for several companies in the non-ferrous metals sector, including Zijin Mining, Luoyang Molybdenum, and Huayou Cobalt [4][5]. Core Views - The report highlights that the recent interest rate cut by the Federal Reserve is expected to support metal prices in the short term, with a structural improvement in demand anticipated during the "golden September and silver October" period in China [2][3]. - The supply disruptions in copper due to the ongoing closure of the Grasberg mine in Indonesia are contributing to a tightening market, which is expected to drive prices higher [2][3]. - The report is optimistic about cobalt and lithium prices due to supply constraints and increasing demand, particularly in the context of the upcoming holiday season and energy storage needs [3][4]. Summary by Sections Industrial Metals - The report notes that industrial metal prices are expected to rise due to the combination of U.S. monetary easing and seasonal demand in China. The SMM copper concentrate import index has shown a slight increase, indicating a tightening supply situation [2][3]. - Aluminum production has seen a slight increase, with downstream demand expected to rise as the holiday season approaches. However, there has been a recent accumulation of aluminum inventory [2][3][4]. Energy Metals - The report anticipates a significant increase in cobalt prices due to potential extensions of export bans from the Democratic Republic of Congo, alongside strong demand for lithium driven by seasonal purchasing and energy storage needs [3][4]. - The report emphasizes that both cobalt and lithium markets are experiencing strong demand growth, with expectations for price increases in the near term [3]. Precious Metals - Following the Fed's interest rate cut, the report expresses a bullish outlook on precious metals, particularly gold, which is expected to benefit from geopolitical tensions and increased central bank purchases [4][5]. - The report highlights that the recent increase in SPDR gold holdings indicates a growing interest from overseas investors, further supporting the bullish sentiment for gold prices [4][5]. Key Company Recommendations - The report recommends several companies for investment, including Zijin Mining, Luoyang Molybdenum, and Huayou Cobalt, based on their strong market positions and growth potential [4][5].

Investment Rating - The report maintains an "Accumulate" rating for the battery industry [1] Core Insights - The battery industry is experiencing accelerated technological breakthroughs, with profitability turning a corner [1] - Solid-state batteries are entering a critical mid-test phase, with significant advancements in the supply chain and technology [3][8] - The demand for energy storage batteries is exceeding expectations, with a notable improvement in profitability [28] Summary by Sections 1. Battery Industry Hotspot Value Analysis - **Solid-State Batteries**: The technology is converging towards sulfide as the main route, with new materials and technologies being rapidly developed. Solid-state batteries significantly enhance safety and energy density, with theoretical values exceeding 500 Wh/kg [8][9] - **Energy Storage Batteries**: Demand is being driven by domestic capacity price compensation and high growth in Europe and emerging markets. Global energy storage battery demand is expected to increase by 60% year-on-year in 2025, with a revised forecast of 500-550 GWh [28][29] 2. Battery ETF (159755): The Largest Battery-Themed ETF - The ETF closely tracks the core leaders in the new energy vehicle and energy storage sectors, showcasing significant long-term investment value due to the high growth potential of these industries [3][28] - As of September 16, 2025, the ETF's scale reached 10.8 billion yuan, with a daily trading volume significantly higher than the industry average [3][28] 3. Solid-State Battery Development - The industry anticipates that small-scale production of solid-state batteries will begin in 2027, with large-scale production expected to exceed 100 GWh by 2030 [25][27] - Major manufacturers like CATL and BYD are making significant progress, with 60Ah automotive-grade cells already offline, achieving energy densities of 350-400 Wh/kg [19][21] 4. Energy Storage Battery Demand and Supply - The global energy storage market is projected to see a demand of 310 GWh in 2025, with a year-on-year growth of 47%. The supply side is expected to maintain a high capacity utilization rate of 86% [35][36] - The price of energy storage batteries is showing signs of recovery, with a bottom-up trend observed in pricing, leading to improved profitability for leading companies [37][38]

Investment Rating - The industry investment rating is "Overweight" indicating that the industry is expected to outperform the overall market [12]. Core Insights - The Democratic Republic of the Congo (DRC) is a major supplier of diamond resources globally, and since February 2025, it has implemented an export ban on diamond products, significantly disrupting the supply side [1][3]. - The DRC's export ban, which began on February 22, 2025, has led to a substantial decline in China's diamond imports, with volumes dropping from 1.9 thousand tons in June to 0.52 thousand tons in August, reflecting a month-on-month decrease of -61.62%, -27.26%, and -62.05% respectively [3][4]. - It is estimated that global effective diamond supply will decrease by 34% from 282,000 tons to 185,000 tons due to the DRC's export suspension lasting seven months [3]. - Demand for diamonds is expected to grow steadily, particularly in emerging sectors such as low-altitude economy and robotics, with a projected increase of 5.06% in diamond demand to 210,900 tons in 2025 [3][6]. - The price of diamonds has risen from a historical low of 159,000 yuan/ton to 277,000 yuan/ton since the DRC's export restrictions were enacted, indicating a strong upward trend in diamond prices [3][6]. Summary by Sections Supply and Demand Dynamics - The DRC's export restrictions are expected to tighten supply, leading to a forecasted diamond price increase in the short term [3]. - The DRC's government has a clear stance on controlling diamond supply, making it unlikely for export restrictions to be lifted in the near future [3]. Company Valuation - Key companies in the diamond sector include Huayou Cobalt, Tongyuan Cobalt, Luoyang Molybdenum, Liqin Resources, and Hanrui Cobalt, which are expected to benefit from the anticipated price increases [3][7].

Investment Rating - The report rates the cobalt industry as "Overweight," indicating an expectation for the industry to outperform the overall market [3][12]. Core Insights - The Democratic Republic of Congo (DRC) is the primary supplier of cobalt globally, and since February 2025, it has implemented an export ban on cobalt products, significantly disrupting supply [3]. - The DRC's export ban has led to a noticeable decline in China's cobalt imports from June to August 2025, with import volumes dropping by 61.62%, 27.26%, and 62.05% respectively [3]. - It is projected that global effective cobalt supply will decrease by 34% from 282,000 tons to 185,000 tons in 2025 due to the DRC's export restrictions [3]. - Demand for cobalt is expected to grow steadily, particularly in the battery sector, with a projected increase of 5.06% in cobalt demand to 210,900 tons in 2025 [3]. - Cobalt prices have risen from a historical low of 159,000 yuan/ton to 277,000 yuan/ton since the DRC's export restrictions began, with expectations for continued price increases in the short term [3]. Summary by Sections Supply and Demand Dynamics - The DRC's export ban is expected to tighten supply, leading to a projected global cobalt supply of 185,000 tons in 2025, down from 282,000 tons [3][6]. - The demand for cobalt in the battery sector is anticipated to grow, with total cobalt demand reaching 210,900 tons in 2025, driven by applications in drones and consumer electronics [3][6]. Price Outlook - Cobalt prices are expected to continue rising due to supply constraints, with a strong long-term price support anticipated from the DRC's government policies [3][6]. Investment Recommendations - The report suggests focusing on companies with profit elasticity in the cobalt sector, including Huayou Cobalt, Tongyuan Cobalt, Luoyang Molybdenum, Liqin Resources, and Hanrui Cobalt [3][7].

Core Viewpoint - The recent surge in Huayou Cobalt's stock price may indicate a significant reversal in the cyclical trend of the industry, following a period of decline [2][6]. Company Overview - Huayou Cobalt, established in 2002 and headquartered in Zhejiang, initially focused on cobalt and copper mining, later expanding into lithium battery materials and significant investments in nickel resources in Indonesia and lithium resources in Africa [2]. - As of 2024, the company's revenue composition includes cobalt (6%), copper (9%), nickel (35%), lithium (5%), ternary precursors (11%), and ternary cathode materials (14%) [2]. - Nickel contributes the highest gross margin at 52%, while traditional businesses like cobalt and copper account for lower margins [2]. Financial Performance - From 2020 to 2024, Huayou Cobalt's revenue grew from 21.2 billion to 60.9 billion yuan, with a compound annual growth rate (CAGR) exceeding 30% [2]. - Net profit attributable to shareholders increased from 1.165 billion to 4.155 billion yuan, with a CAGR of 37.4% [2]. - In the first half of 2025, the company reported revenue of 37.2 billion yuan, a year-on-year increase of 23.8%, and a net profit of 2.71 billion yuan, up 62.3% year-on-year [4]. Market Dynamics - The cobalt market has experienced significant price fluctuations over the past two decades, with three major bull markets driven by factors such as the rise of electric vehicles [7]. - Cobalt prices fell to a low of 9.95 USD/pound in February 2025 but began to recover due to supply constraints from the Democratic Republic of Congo (DRC) [7][8]. - The DRC, which accounts for 78% of global cobalt supply, has implemented export bans that have significantly reduced global supply, leading to a surge in domestic cobalt prices [11][12]. Nickel Market Insights - Indonesia's nickel production has rapidly expanded, with output increasing from 770,000 tons in 2022 to 1.6 million tons in 2024, contributing to a global oversupply [12]. - However, long-term demand for nickel is expected to rise significantly due to the anticipated growth of solid-state batteries, which could lead to a supply-demand imbalance by 2027 [13]. - Huayou Cobalt has strategically invested in Indonesian nickel resources since 2018, with nickel-related revenue growing from 250 million to 21.3 billion yuan from 2021 to 2024 [13]. Investment Outlook - The market is expected to shift from technology stocks to cyclical and consumer sectors, which may benefit Huayou Cobalt's valuation recovery [14]. - The company's current price-to-book (PB) ratio of 2.24 is significantly lower than the median of 4.69 over the past decade, suggesting potential for valuation improvement [6].

Core Viewpoint - The non-ferrous metal sector has surged over 60% this year, with cobalt metal industry leaders also performing exceptionally well, particularly Huayou Cobalt, which has seen an increase of nearly 80% [2][5]. Company Overview - Huayou Cobalt, founded in 2002 and headquartered in Zhejiang, initially focused on cobalt and copper mining, later expanding into lithium battery materials and significant investments in nickel resources in Indonesia and lithium resources in Africa [5]. - As of 2024, Huayou Cobalt's revenue sources include cobalt (6%), copper (9%), nickel (35%), lithium (5%), ternary precursors (11%), and ternary cathode materials (14%), with nickel contributing the highest gross margin at 52% [5]. - From 2020 to 2024, the company's revenue grew from 21.2 billion to 60.9 billion yuan, with a compound annual growth rate (CAGR) exceeding 30%, and net profit increasing from 1.165 billion to 4.155 billion yuan, with a CAGR of 37.4% [5]. Recent Performance - In the first half of 2025, Huayou Cobalt reported revenue of 37.2 billion yuan, a year-on-year increase of 23.8%, and net profit of 2.71 billion yuan, up 62.3% [8]. - Nickel product revenue reached 12.84 billion yuan, a staggering increase of 138%, driven by the ramp-up of projects in Indonesia [8]. - Despite a decline in cobalt, copper, and lithium revenues, the company's net profit margin reached a three-year high of 9.33%, attributed to effective cost control measures [8]. Market Dynamics - Cobalt prices have shown significant cyclical fluctuations, with recent supply constraints from the Democratic Republic of Congo (DRC) leading to a potential price surge, with domestic cobalt prices rising from 166,000 yuan/ton in February to 270,000 yuan/ton by September [12][14][15]. - The DRC's export ban on cobalt has reduced global supply by approximately 200,000 tons, which is 40% of annual demand, creating a favorable environment for Huayou Cobalt and other companies in the cobalt supply chain [15][17]. - Nickel production in Indonesia has rapidly expanded, with production expected to reach 16 million tons by 2024, but current oversupply conditions have led to declining nickel prices [18][19]. Future Outlook - The demand for nickel is anticipated to experience explosive growth starting in 2027, driven by the adoption of solid-state batteries, which could significantly benefit Huayou Cobalt, given its substantial investments in nickel resources [20][21]. - The A-share market is expected to shift from technology to cyclical and consumer sectors, which may support Huayou Cobalt's valuation recovery [23].

Core Viewpoint - Huayou Cobalt announced that investors holding "Huayou Convertible Bonds" can either continue trading in the secondary market within the specified time or convert at a price of 34.43 CNY per share. If forced redemption occurs, investors may face significant losses [2]. Summary by Relevant Sections - **Investment Options**: Investors can trade in the secondary market or convert bonds at 34.43 CNY per share [2]. - **Forced Redemption**: If bonds are forcibly redeemed, investors will receive 100 CNY per bond plus accrued interest of 0.8918 CNY, totaling 100.8918 CNY per bond [2]. - **Potential Losses**: The possibility of forced redemption may lead to substantial investment losses for bondholders [2].

Group 1 - The concept of the Russia-Ukraine conflict saw an increase of 0.76%, ranking 10th among concept sectors, with 46 stocks rising, including Tongguang Co. and Kaimete Gas reaching the daily limit [1] - Notable gainers in the sector included Jiufeng Energy, Donghua Energy, and Xinjiang Torch, which rose by 8.09%, 4.38%, and 4.03% respectively [1] - The top decliners were Shengli Co., Shennong Seed, and Fengmao Co., which fell by 2.72%, 2.40%, and 2.38% respectively [1] Group 2 - The Russia-Ukraine conflict concept sector attracted a net inflow of 1.085 billion yuan, with 35 stocks receiving net inflows, and 5 stocks exceeding 50 million yuan in net inflows [2] - Kaimete Gas led the net inflow with 670 million yuan, followed by Huayou Cobalt, COSCO Shipping Holdings, and COSCO Energy with net inflows of 449 million yuan, 123 million yuan, and 103 million yuan respectively [2] - The net inflow ratios for Kaimete Gas, COSCO Energy, and Tongguang Co. were 24.35%, 12.97%, and 12.91% respectively [3] Group 3 - The top stocks in the Russia-Ukraine conflict concept sector based on net inflow included Kaimete Gas, Huayou Cobalt, and COSCO Shipping Holdings, with respective daily price changes of 10.02%, 1.96%, and 1.29% [4] - Other notable stocks included Donghua Energy with a 4.38% increase and Xinjiang Torch with a 4.03% increase [7] - The overall market performance showed a mixed trend with various sectors experiencing both gains and losses [2][5]