From contraction to recovery: China's cobalt market outlook for H2 2026

I. Price Trends: YoY Increase but Under Pressure Within the Year

In H1 2026, electrolytic cobalt prices generally exhibited a trend of retreating from highs and fluctuating downward. In early 2026, electrolytic cobalt prices briefly exceeded Yuan 450,000/tonne, but by early July had fallen back to around Yuan 380,000/tonne, down approximately 16% from the beginning of the year. The key reason domestic cobalt prices failed to rise despite supply contraction was weak downstream demand combined with a wait-and-see sentiment, market participants chose to await the concentrated arrival of raw material shipments in Q3, thereby dampening spot purchasing intentions. Nonetheless, on a year-on-year basis, the average electrolytic cobalt price still registered an increase of about 110%, reflecting that after the implementation of the Democratic Republic of the Congo (DRC) export restriction policy, the overall price floor had already risen substantially from 2025 levels.

II. Supply-Demand Dynamics: Primary Shortage Offset by Secondary Material Expansion

On the supply side, the rigid tightening of primary cobalt supply was the fundamental theme throughout H1. The DRC implemented an export ban in March 2025 and introduced a quota system in October, capping annual export ceilings for 2026–2027 at 96,600 tonnes, a reduction of over 50% compared with 2024 production levels. As a result, China's cobalt intermediate imports plummeted by 96% YoY to 2,934 tonnes in H1 2026, creating a significant raw material shortfall. Although Indonesian MHP by-product cobalt partially offset the gap, the incremental volume was constrained by sulphur shortages and RKAB quota limitations.

Source: Mysteel

In contrast to the primary cobalt shortage, domestic recycled cobalt continued to expand, recycling channels for power battery black mass, scrap alloys, and other sources grew rapidly, becoming an important supplement to the domestic raw material market and effectively cushioning the supply shock from the primary ore deficit.

On the demand side, overall performance was weak. Consumer electronics were in the traditional off-season, with sluggish 3C end-side shipments and continued destocking of lithium cobalt oxide. In the power battery sector, the proliferation of low-cost battery chemistries limited the boost to cobalt consumption.

III. Inventory Destocking: Low Levels Provide Price Support for H2

In H1 2026, China's social inventories of electrolytic cobalt declined by approximately 10,000 tonnes, a notable drawdown. Low inventory levels, together with rigid supply shortages, form the foundation for price support in H2. In early July, a customs system failure in the DRC interrupted export declarations, and approximately 10,000 tonnes of export quotas could face expiry risk, further heightening supply uncertainty.

Source: Mysteel

IV. H2 Outlook: Demand Recovery Expected to Drive a Price Bottom and Rebound

In H2, the core logic of the cobalt industry is expected to gradually shift from "upstream margin squeeze due to weak demand" to "bottoming out amid tight supply." In H1, persistently weak demand was the primary contradiction, with prices across all product segments being squeezed from downstream to upstream in a cascading manner.

Entering Q3, as LCO inventories in the 3C battery segment have already fallen to low levels, a marginal recovery in procurement demand is likely to boost prices for Co3O4 and cobalt chloride. Unlike the cobalt chloride route, demand for cobalt sulfate from downstream ternary precursor producers is set to soften slightly, and with diversified raw material sources, upward price momentum for cobalt sulfate will be limited, more likely showing signs of bottoming and stabilizing. For electrolytic cobalt, the re-melting economics are favourable in Q3, and continued destocking, coupled with rising bullish sentiment among funds, may push prices gradually towards Yuan 410,000–420,000/tonne by the end of Q3.

In Q4, LCO enters its traditional off-season, and the upward momentum for Co3O4 and cobalt chloride will weaken. However, supported by tight raw material supply, prices are expected to stabilize or edge slightly higher. Cobalt sulfate will be underpinned by cost support but faces softening demand, limiting its upside. As electrolytic cobalt prices rise, the marginal economics of re-melting will diminish, with prices forecast to fluctuate within the Yuan 420,000–430,000/tonne range during the quarter.

Edited by Cassie Li, lixiangying@mysteel.com