Nickel Sinks on Macro Fears; Cobalt Rises on DRC Supply Risk
The battery metals complex is fractured. Nickel prices plunged, with the SHFE contract breaking the 116,000 yuan/mt support level to close at 114,850 yuan/mt. The drop is blamed on "hawkish" US Fed signals, a rising dollar, and high inventories. In contrast, cobalt prices are climbing. Cobalt intermediate product prices are holding firm, and cobalt sulphate prices edged up. This strength is driven by supply-side fears, as export approvals in the DRC remain incomplete, leading to expectations of a structurally tight market in China through Q1 2026.
Nickel's Macro-Driven Plunge
The nickel market faced a sharp sell-off this week, with prices plummeting and breaking through multiple key support levels. The #1 refined nickel average price fell by 1,750 yuan/mt, while the most-traded SHFE contract closed at 114,850 yuan/mt.
This weakness is not tied to fundamentals but to macro-economic headwinds. "Hawkish" signals from US Fed officials have dampened expectations for a December rate cut, strengthening the US dollar and pressuring commodities. High market inventory is compounding the problem. This pressure is also seen in intermediates, with prices for Mixed Hydroxide Precipitate (MHP) and high-grade nickel matte declining in sync.
An Emerging Arbitrage
The weakness in refined nickel, combined with relative stability in nickel sulphate, has opened a notable market dislocation. The premium of battery-grade nickel sulphate over refined nickel has widened to nearly 10,000 yuan. At this level, it has become theoretically economical for refined nickel producers to convert their metal directly into nickel sulphate. If this trend holds, it could divert refined nickel supply and ease the tightness in the nickel sulphate market.
Cobalt's Supply-Side Strength
While nickel suffers, cobalt prices are holding firm and, in some cases, rising. The price for cobalt sulphate edged up slightly, driven by domestic Chinese smelters raising offers due to cost pressures. The strength originates from upstream supply concerns.
Prices for cobalt intermediate products are holding up well on expectations of supply tightening. Market participants are watching the Democratic Republic of Congo (DRC), where export approval procedures have not been completed. This has led to forecasts of a structurally tight domestic cobalt supply in China persisting until at least Q1 2026. This DRC tightness is also pulling MHP cobalt prices sharply higher, even as MHP nickel prices fall.
North American Cobalt Focus
Amidst this volatility, efforts to secure a non-DRC, non-China cobalt supply chain are accelerating. Electra Battery Materials has reactivated construction at what it bills as North America's only cobalt sulfate refinery in Ontario. The project is now moving forward, backed by approximately US$48 million in combined support from the US and Canadian governments and a freshly closed US$34.5 million financing.
Outlook
Bearish (Nickel) / Bullish (Cobalt)
The short-term outlook for nickel is decidedly Bearish. Macro pressure and high inventories are driving the price, and fundamentals have not been strong enough to counter the trend.
Conversely, the sentiment for cobalt is Bullish. The market is entirely focused on the supply bottleneck in the DRC. With export approvals stalled, the fear of a structural deficit in the coming months is overriding other factors, as evidenced by Chinese material makers pushing for higher prices. This divergence between the two key battery metals is expected to continue.