Zhongjin: Congo (Gold) announces cobalt quotas, strategic reevaluation is timely.

CICC released a research report stating that, as of October 11, according to SCI99 and Asian Metal, the price increases of cobalt intermediates, MB cobalt, and metallic cobalt were 185%, 107%, and 123% respectively compared to February 24. Secondly, considering that some mining companies have signed long-term contracts, the prices of cobalt products may be led by platforms that control cobalt raw materials, with a few platforms having pricing power and exacerbating price fluctuations and increasing price elasticity. Among them, Zhejiang Huayou Cobalt (603799.SH), CMOC Group Limited (603993.SH,03993) are recommended. CICC's main points are as follows: Quotas are mainly allocated to mining companies and the Congolese government platform, with no quotas allocated to smelters. In terms of total amount, there is 18,100 tons of cobalt export quotas remaining for the rest of this year; for 2026/27, each year will have 96,600 tons of export quotas, with 87,000 tons being the basic quota and 9,600 tons being the ARECOMS strategic quota. In terms of structure, CMOC Group Limited, Zhejiang Huayou Cobalt, Eurasian Resources, and other mining companies obtained the main quotas, with a combined share of 62%; EGC, STL, ARECOMS government platforms account for a combined share of 17%; local cobalt smelters have no direct quotas. Tightening supply is expected to push up cobalt prices, and the revaluation of the strategic value of cobalt is timely. In terms of supply, the annual total export quotas for cobalt in 2026/27 are only 44% of the cobalt production in the Congo in 2024, with basic quotas accounting for only 40%. In terms of demand, ternary batteries have a distinct advantage in the high-end long-range market, and their penetration rate is expected to gradually bottom out. The industrialization of solid-state batteries is expected to open up the demand space for ternary batteries. CICC believes that the global cobalt industry supply and demand are expected to be in a sustained tight situation from 2025 to 2027, and the cobalt price center is expected to rise systematically. The Congolese cobalt export ban has two main intentions: boost cobalt prices to curb the flow of strategic resources at low prices, and enhance international discourse power by controlling strategic resources. A significant reduction in supply will drive greater price increases in raw materials, and platforms that control cobalt raw materials may lead the market price and increase price elasticity. One is that the Congo's cobalt production accounted for 76% in 2024, and its supply reduction of more than 50% has had a significant impact on global supply, leading to greater price increases in cobalt raw materials. According to SCI99 and Asian Metal, as of October 11, the price increases of cobalt intermediates, MB cobalt, and metallic cobalt were 185%, 107%, and 123% respectively compared to February 24. Secondly, considering that some mining companies have signed long-term contracts, the prices of cobalt products may be led by platforms that control cobalt raw materials, with a few platforms having pricing power and exacerbating price fluctuations and increasing price elasticity. Among them, Zhejiang Huayou Cobalt, the Congolese government platform, and Eurasian Resources have quotas shares of 20%, 17%, and 11% respectively. Risk factors The limited cobalt price increase measures in Congo may not meet expectations, and downstream demand may not meet expectations.