[SMM Analysis] Inventory Pressure Throughout the Industry Chain, Cobalt Products Under Overall Pressure

This week, the industry chain remained sluggish from top to bottom, with every segment from cobalt chloride to lithium cobalt oxide (LCO) under dual pressure from high inventories and weak demand.

Cost side, the cost of recycled materials and refined cobalt financing has now fallen significantly below market quotes, but upstream smelters generally hold previously acquired high-cost inventories, making it difficult to lower costs through low-price purchases in a falling market. This kept cobalt chloride offer prices seemingly firm on the surface. Some enterprises have begun to gradually sell at reduced margins, trying to accelerate turnover to offset losses, but downstream uptake is extremely weak, and even price cuts cannot generate meaningful volumes. Midstream Co3O4 enterprises, squeezed by the triple pressures of high inventories, thin margins, and inventory buildup risks, have generally kept production rates low. Although there are market rumors of a few ultra-low price sources, they are not yet broadly representative. Downstream cathode material plants hold ample inventories, so short-term procurement is not needed to sustain production, with inquiries far outnumbering actual transactions. In the LCO segment, faced with persistently weak demand, enterprises had to cut prices to sell in order to defend market share, sharply compressing profit margins, while shipments did not improve correspondingly. Notably, although battery cell manufacturers’ production schedules rebounded, the growth did not trickle upstream, partly because the substitution ratio of ternary cathode materials increased, further diverting demand away from LCO.

In summary, inventory destocking across the entire industry chain has been slow and demand transmission has been hindered. Cobalt chloride and Co3O4 prices still have downside room in the near term, while LCO prices will remain largely stable with limited fluctuations.