Summary of Cobalt Sector Conference Call Industry Overview - The cobalt sector is significantly impacted by the Democratic Republic of Congo (DRC), which accounts for 75% of global cobalt supply. In 2025, DRC's cobalt export quota is drastically reduced to 96,600 tons, a decrease of approximately 120,000 tons compared to 2024 production levels, with 10% designated as strategic quotas [1][3]. Key Points and Arguments - **Cobalt Price Fluctuations**: In 2025, cobalt prices experienced three notable increases, rising from 160,000 CNY to 400,000 CNY due to DRC's export ban and quota policies. The price surged from 300,000 CNY to 400,000 CNY following the announcement of export quotas [1][4]. - **Supply and Demand Dynamics**: Global cobalt demand is primarily driven by the battery industry, with an estimated demand of 200,000 to 220,000 tons in 2025. The production of ternary and lithium cobalt oxide materials is showing high growth, with November production increasing nearly 40% year-on-year [1][6]. - **Chinese Inventory Trends**: China's cobalt inventory has been declining, with a reduction of 8,000 tons in the first ten months of the year, leaving approximately 56,000 tons in stock. If no new shipments arrive by the end of April 2026, domestic inventory may be depleted, leading to panic buying [1][7]. - **Impact of Indonesian MHP Project**: The Indonesian MHP project, which typically adds about 3,000 tons monthly, is halted until March 2026 due to tailings issues, further constraining supply. Additionally, Glencore's remaining 10,000 tons of intermediate products will be sold out in the near term, intensifying supply pressure [1][8]. - **Future Price Predictions**: If DRC export licenses are delayed until after Christmas, domestic inventory could be rapidly consumed, potentially triggering a new price surge in December. Current electrolytic cobalt prices are around 400,000 CNY, with further increases possible under these conditions [1][9]. Additional Important Insights - **Electrolytic Cobalt Market**: Electrolytic cobalt constitutes only about 10% of total cobalt consumption, with annual consumption between 10,000 to 20,000 tons. Recent months have seen raw material prices exceed electrolytic cobalt prices, leading to reduced production [1][10]. - **Stock and Price Dynamics**: Despite rising commodity prices, inventory levels at Zhonglian Gold have not increased, indicating that available inventory is concentrated there. Some cobalt refining and processing companies are expected to gradually stockpile metallic cobalt as a raw material reserve [1][11]. - **Potential Extreme Scenarios**: If raw material supply disruptions occur mid-2026, the entire supply chain could face significant challenges, granting pricing power to companies with raw material reserves. This scenario necessitates close monitoring of DRC's export progress [1][12]. Recommended Companies - Companies with Indonesian MHP capacity reserves, such as Huayou Cobalt, Likin Resources, and Greeenmei, are recommended for their advantages in handling potential extreme market conditions. Additionally, companies with smelting and processing capabilities, like Tengyuan Cobalt and Hanrui Cobalt, are also positioned to benefit from rising prices [2][13]. Future Outlook for Huayou Cobalt - Huayou Cobalt is well-positioned not only to navigate potential extreme market conditions but also to capitalize on its lithium carbonate business, with projected production of 60,000 to 80,000 tons in 2026. The company maintains a cost control of under 60,000 CNY per ton for lithium carbonate, making it a strong candidate for performance in a rising market [2][14].

格隆汇12月2日｜在供应端严格管控的背景下，钴价周一突破了"五万大关"。伦敦金属交易所（LME） 钴期货收涨1465美元，报50035美元/吨。此前有报道指出，虽然刚果（金）钴出口禁令已经到期，但刚 果民主共和国（DRC）尚未恢复出口。作为背景，刚果（金）供应了全球约四分之三的钴，对其出口 政策的任何变化都将影响全球电动车、电池及航空航天产业链。因不满钴价太低于今年2月22日开始实 施出口禁令，随后又在6月延长3个月，直到9月最终决定实施配额制。最终，出口禁令于10月15日结 束，随后10月16日由新的配额制度取代，以在出口重启后控制供应。 ...

Core Viewpoint - The recent announcement from the Democratic Republic of Congo (DRC) regarding cobalt export quotas is expected to positively impact cobalt prices and benefit companies like Liqin Resources, which has significant operations in Indonesia [1] Group 1: Cobalt Export Quota Policy - The DRC will implement a cobalt export quota system starting from October 16, 2025, with a remaining export limit of 18,100 tons for the rest of 2025 [1] - The annual quota for 2026-2027 is set at 96,600 tons, allocated based on companies' historical export volumes, with unused quotas transferable to strategic quotas [1] - The government retains the right to make dynamic adjustments to the quotas [1] Group 2: Market Implications - Tianfeng Securities suggests that the new quota policy indicates a long-term balance or even a shortage in supply and demand, leading to an expected increase in cobalt prices [1] - CICC notes that the total cobalt export quota for 2026/2027 will only account for 44% of the DRC's cobalt production in 2024, indicating a tightening supply [1] - The tightening of export quotas is anticipated to drive cobalt prices higher, benefiting Liqin Resources' wet processing capacity in Indonesia and potentially leading to an expansion in the nickel industry chain [1]

Core Viewpoint - Huayou Cobalt's profit growth is showing signs of fatigue after a strong performance over the past six months, with third-quarter results indicating a slowdown in profit growth despite a significant increase in revenue [2][9]. Financial Performance - In Q3 2025, Huayou Cobalt achieved revenue of 21.744 billion yuan, a year-on-year increase of 40.85%, and a net profit attributable to shareholders of 1.505 billion yuan, up 11.53% year-on-year [2][9]. - For the first three quarters of 2025, the company reported revenue of 58.941 billion yuan, a 29.57% increase, and a net profit of 4.216 billion yuan, up 39.59% year-on-year [9]. - The company's gross profit margin for the first three quarters was 16.18%, slightly down from 17.53% in the same period last year [10]. Market Dynamics - The surge in Huayou Cobalt's stock price, which reached a historical high of 73 yuan per share, is attributed to macroeconomic cycles, geopolitical factors, and fundamental industry dynamics, with a significant influence from cobalt price increases [3][4]. - The Congolese government's cobalt export ban, which has been extended multiple times, has led to a tightening of global cobalt supply, contributing to rising cobalt prices [4][7]. Cobalt Supply and Pricing - The new export quota system from the Democratic Republic of Congo (DRC) limits cobalt exports to 18,125 tons for the remainder of 2025, with Huayou Cobalt receiving only 1.2% of the total quota [4][6]. - Cobalt prices have risen significantly, from $37,787 per ton at the end of September to $44,290 per ton by October 20, marking a 17.2% increase and over 121.5% rise compared to the average price of $20,000 per ton at the beginning of the year [4][6]. Competitive Position - Huayou Cobalt's reliance on Indonesian nickel projects for cobalt supply means it is less affected by the DRC's quota policies, but it can still benefit from higher cobalt prices due to supply constraints [6][7]. - Compared to competitors like Luoyang Molybdenum, Huayou Cobalt's cobalt product revenue and profit contributions are lower, indicating a difference in industry structure and sensitivity to price cycles [10]. Future Outlook - The company plans to continue engaging in overseas resource allocation and integrating into international industrial divisions to drive high-quality development amid a complex macro environment [12].

Investment Rating - The investment rating for Huayou Cobalt (603799) is "Buy" (maintained) [1] Core Views - The report highlights stable nickel profits in Q3 and anticipates significant profit elasticity from rising cobalt prices in the future [7] - The company is expected to achieve a total revenue of 81.86 billion yuan in 2025, with a year-on-year growth of 34.32% [1] - The net profit attributable to shareholders is projected to reach 6.03 billion yuan in 2025, reflecting a year-on-year increase of 45.17% [1] Financial Performance Summary - For the first three quarters of 2025, the company reported revenue of 58.94 billion yuan, up 29.6% year-on-year, and a net profit of 4.22 billion yuan, up 39.6% year-on-year [7] - Q3 2025 revenue was 21.74 billion yuan, with a quarter-on-quarter increase of 40.9% and a year-on-year increase of 12.3% [7] - The gross profit margin for Q3 was 16.7%, slightly down from the previous quarter [7] Nickel and Cobalt Production Insights - Nickel is the main profit contributor, with expected nickel product shipments of 240,000 tons for the year [7] - Cobalt shipments are projected at approximately 35,000 tons for the first three quarters of 2025, with Q3 shipments increasing by 40% [7] - The report anticipates cobalt prices to rise to 400,000 yuan/ton, significantly boosting profit contributions in 2026 [7] Financial Forecasts - The forecast for net profit attributable to shareholders for 2025-2027 is adjusted to 6.0 billion, 9.0 billion, and 10.9 billion yuan respectively, with corresponding P/E ratios of 19x, 13x, and 11x [7] - The target price is set at 95 yuan, based on a 20x P/E for 2026 [7] Cash Flow and Capital Expenditure - Operating cash flow for the first three quarters of 2025 was 4.18 billion yuan, up 8.8% year-on-year [7] - Capital expenditure for the same period was 7.88 billion yuan, reflecting a 53.3% increase year-on-year [7]

Core Viewpoint - The recent quota policy from the Democratic Republic of Congo (DRC) has established a total quota of 96,600 tons for cobalt exports, with a base quota remaining unchanged at 87,000 tons, impacting major companies in the industry [1][2]. Quota Distribution - The quota distribution is as follows: - Luoyang Molybdenum Company (Luoyang Moly) received 36% of the quota, equating to an annualized 31,200 tons - Glencore received 22%, or 18,800 tons - Eurasian Resources received 12%, or 10,000 tons - The local company EGC received 6.5%, or 5,640 tons - Other Chinese companies such as Northern Mining received 5.5% (4,800 tons), Shengton Mining 2% (1,680 tons), and Huayou Cobalt 1.24% (1,080 tons) [2][3]. Policy Implications - The quota allocation aligns with expectations based on historical export volumes from January 1, 2022, to December 31, 2024, although the allocation for EGC is notable given its lack of past exports [3]. - The introduction of a 10% royalty fee on sales value for companies receiving cobalt export quotas is expected to significantly increase local revenue [3]. Market Outlook - The total quota of 96,600 tons represents a 56% decrease compared to last year's exports of nearly 220,000 tons, indicating a tighter supply-demand balance for cobalt [4]. - Current inventory levels are critical, with an estimated four months of supply across the industry chain, which could lead to increased price pressures as inventory is consumed [5]. Price Trends - As of October 13, cobalt prices have seen significant increases, with prices for cobalt sulfate, lithium cobalt oxide, and battery-grade cobalt rising by 40%, 38%, and 29% respectively from September 22 to October 13 [5]. Investment Recommendations - The industry is expected to experience upward price movement due to ongoing inventory depletion and low stock levels, with a long-term view suggesting a potential increase in cobalt price stability [5]. - Companies less affected by DRC policies, such as Huayou Cobalt and Likin Resources, as well as low-cost producers like Luoyang Moly, are recommended for investment [5].

Core Viewpoint - The recent quota policy introduced by the Democratic Republic of Congo (DRC) is expected to lead to a short-term price increase for cobalt due to low inventory levels and a tight supply-demand balance, with a long-term positive outlook for cobalt prices [1][3]. Quota Policy Summary - The total quota for cobalt exports is set at 96,600 tons, with a base quota remaining unchanged at 87,000 tons [1]. - Major companies receiving quotas include: - Luoyang Molybdenum: 36% share, annual quota of 31,200 tons - Glencore: 22% share, annual quota of 18,800 tons - Eurasian Resources: 12% share, annual quota of 10,000 tons - EGC (local DRC company): 6.5% share, annual quota of 5,640 tons - Northern Mining: 5.5% share, annual quota of 4,800 tons - Shengton Mining: 2% share, annual quota of 1,680 tons - Huayou Cobalt: 1.24% share, annual quota of 1,080 tons [1][2]. Market Outlook - The quota of 96,600 tons represents a 56% decrease compared to last year's export volume of nearly 220,000 tons, indicating a tighter supply situation [3]. - Current inventory levels are critical, with approximately four months of supply across the industry chain, which could lead to increased supply tension if any segment holds excess stock [3]. - Recent price increases for cobalt products have been significant, with prices for cobalt sulfate, lithium cobalt oxide, and cobalt metal rising by 40%, 38%, and 29% respectively from September 22 to October 13 [3]. Investment Recommendations - Companies not significantly affected by DRC policies, such as Huayou Cobalt (603799.SH) and Liqin Resources (02245), are recommended for investment [4]. - Luoyang Molybdenum (603993.SH, 03993) is highlighted as a low-cost supplier with reduced uncertainty following the quota announcement [4].

Investment Rating - Industry Rating: Outperform the Market (maintained rating) [7] Core Viewpoints - The recent quota policy from the Democratic Republic of the Congo (DRC) has set a total quota of 96,600 tons, with a base quota remaining unchanged at 87,000 tons. Major companies receiving quotas include Luoyang Molybdenum (36% share), Glencore (22% share), and Eurasian Resources (12% share) [2][3] - The quota distribution aligns with expectations, although the local DRC company EGC received a quota despite minimal past exports, likely due to local policy support. The introduction of a 10% royalty fee on cobalt sales will significantly increase local revenue [3][4] Summary by Sections Quota Distribution - The quota distribution is based on historical export volumes from January 1, 2022, to December 31, 2024. The current quota aligns with expectations, with the DRC's local company EGC receiving a quota despite limited past exports [3] - The total quota of 96,600 tons represents a 56% decrease compared to last year's exports of nearly 220,000 tons, indicating a tightening supply-demand balance [4] Market Outlook - The current inventory situation is critical, with an estimated four months of inventory across the supply chain. This could lead to increased supply tension if any segment of the chain holds excess stock [4] - As of October 13, prices for cobalt sulfate, lithium cobalt oxide, and battery-grade cobalt have increased by 40%, 38%, and 29% respectively from September 22 to October 13, indicating strong downstream demand [4] Investment Recommendations - Short-term expectations include continued inventory depletion and potential price increases due to low inventory levels. The long-term logic suggests a direct supply-demand balance or even a shortage, leading to an upward adjustment in cobalt prices [5] - Companies not significantly affected by DRC policies, such as Huayou Cobalt and Likin Resources, as well as Luoyang Molybdenum, which has now clarified its quota status, are recommended for investment [5]

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the impact of the Democratic Republic of the Congo (DRC) government's new cobalt resource management policies on the cobalt industry, particularly affecting Chinese enterprises and the global cobalt supply chain [1][10]. Core Insights and Arguments - **New Cobalt Policies**: The DRC has implemented a quota system and export licensing to enhance tax revenue, prevent smuggling, and promote local industry development. This has temporarily restricted raw material imports for Chinese companies, affecting their strategic reserves and smelting operations [1][10]. - **Export License Requirements**: Companies must pay mining privilege fees and meet several conditions, including prepayment, quota verification, product traceability, and compliance with ESG standards to activate export licenses [1][5]. - **Impact on Chinese Companies**: Companies without their own mines, such as Hanrui and Tengyuan Cobalt, have struggled to obtain quotas due to regulatory non-compliance. However, EDC and STL are allowed to process artisanal mining products [1][8][10]. - **Hanrui's Production Capacity**: Hanrui has a cobalt production capacity of 5,000 tons in the DRC and is seeking to export independently of the strategic quota to alleviate supply shortages. The future of Hanrui's production depends on pricing and export licensing [1][9]. - **Global Cobalt Market Dynamics**: Major suppliers like Glencore, Exxon, and Eurasian Resources dominate the market, holding at least 70% market share. China may increasingly rely on Indonesian production to meet demand, but a supply gap is expected by 2026 [1][11]. - **Supply Shortages**: A projected cobalt supply gap of approximately 20,000 tons is anticipated in 2026, potentially widening in 2027. The demand from 3C products is expected to be more resilient to price increases compared to electric vehicle batteries [2][17]. - **Cobalt Pricing and Demand Elasticity**: The price sensitivity of 3C products is higher, with procurement continuing at prices between 450,000 to 500,000 CNY per ton. In contrast, electric vehicle manufacturers may reduce purchases if prices exceed 450,000 CNY per ton [18]. Additional Important Insights - **Inventory Management**: Chinese companies have begun to deplete cobalt inventories since June, with expectations to consume existing stocks by the end of 2025. The current inventory levels are around 70,000 to 80,000 tons [12][23]. - **Safety Stock Levels**: Historically, companies maintained about three months of safety stock, but due to current supply constraints, many have reduced this to around one month [24]. - **Potential for Future Policy Changes**: The DRC government is unlikely to relax mineral quotas in the near term, as they are focused on strict enforcement of the new policies to avoid triggering excessive taxation [19]. This summary encapsulates the critical aspects of the conference call, highlighting the implications of the DRC's new cobalt policies on the industry and the challenges faced by companies, particularly those in China.

Core Viewpoint - The cobalt supply chain is undergoing significant changes due to the lifting of the export ban by the Democratic Republic of the Congo (DRC) and the implementation of an export quota system, which is expected to lead to a substantial increase in cobalt prices in the coming years [2][4][10]. Export Ban and Quota Management - The DRC announced that the cobalt export ban, which lasted for nearly eight months, will be lifted on October 16, with an annual export quota management system introduced [2][3]. - The export cap for the remainder of 2025 is set at 18,125 tons, with future quotas for 2026 and 2027 being significantly lower than the country's production capacity [3][4]. - The quota system is based on the export performance of companies in 2022, 2023, and 2024, with penalties for non-compliance [3][4][7]. Price Impact and Market Dynamics - The lifting of the export ban and the introduction of quotas are expected to tighten global cobalt supply, leading to a projected shortage of 122,000 tons, 88,000 tons, and 97,000 tons in 2025, 2026, and 2027 respectively [2][10]. - Cobalt prices have already doubled this year, with the latest price for electrolytic cobalt in China reaching 349,500 yuan per ton [9]. - Analysts predict that the combination of supply constraints and rising demand from sectors like electric vehicles and consumer electronics will further drive up cobalt prices, potentially exceeding 400,000 yuan per ton [9][10]. Strategic Implications for Companies - Major cobalt producers like Luoyang Molybdenum and Glencore are set to receive significant export quotas, but these may still fall short of their production capacities [10]. - The DRC government aims to control global cobalt prices through flexible supply adjustments, which could benefit companies with operations in Indonesia and those holding mining rights in the DRC [10].