Cobalt salts prices rose further on bullish prospects, downstream operations yet to fully resume

SHANGHAI, Feb 24 (SMM) – Transactions increased in the cobalt and lithium chain last week as more producers returned from holidays. Downstream stockpiling on a bullish outlook for prices extended the rise in cobalt salts, while prices of lithium carbonate failed to increase as downstream producers barely accepted higher offers. 

SMM expects a structural shortage to sustain the upward trend in cobalt salts prices in the short term, before the resumption of logistics and supply stabilises prices. 

According to SMM database, China’s production of new energy vehicles (NEVs) that obtained qualification stood at 48,000 units in January, down 52.3% from a year earlier. Among this, the production of passenger NEVs accounted for the greatest share of 88%, while new energy busses took up the smallest 5.6%. 

Capacity of power batteries installed on NEVs declined 53.5% on the year to 2.3GWh in January, with ternary batteries accounting for 68.2% and lithium iron phosphate (LFP) batteries making up 31.2%. 

Battery producers in China have mostly restarted production, but continued regulations to contain the coronavirus will keep the operating rates from returning to normal levels in the short term. Battery plants currently produce and arrange shipment for pre-holiday orders, and new deals are expected at end February. 

It raised market attention last week that Tesla said it would purchase completely cobalt-free battery cells—LFP cells—for the first time as part of its supply contract with China’s CATL. But SMM expects this to cause a limited impact on the overall demand for cobalt raw materials and ternary batteries will maintain its mainstream trend in NEVs over the next three years, considering the technology constraints facing LFP batteries in mass density and the downward trend in costs of high-nickel ternary batteries.

In the week ended February 21, prices of refined cobalt increased 1,500 yuan/mt from the prior week to 275,000-280,000 yuan/mt, with prices of cobalt hydroxide rising $0.2/lb from a week ago to $9.6-10.4/lb. 
Higher offers from the overseas market lifted domestic prices last week. Domestic trades of refined cobalt remained muted, as only a few trades occurred at medium-scale and small producers and some major mills withheld from providing offers. 

SMM assessed the average prices of cobalt sulphate at 56,000-59,000 yuan/mt last week and prices of cobalt chloride at 67,000-69,000 yuan/mt, up 2,250 yuan/mt and 2,500 yuan/mt from a week ago, respectively. Prices of battery-grade nickel sulphate remained unchanged at 24,500-25,000 yuan/mt.
Prices of cobalt salts extended their increase on the back of improved trades. Cobalt salts producers, except for those in Hubei, the centre of the coronavirus outbreak, have mostly resumed operations, while manpower and raw materials issues kept the operating rates at low levels. Bullish prospects for prices drove major downstream plants to restock actively on low inventories of raw materials, and this lifted cobalt salts prices. SMM expects near-term prices of cobalt salts to remain firm as the structural supply shortage will sustain this week even as the gradual recovery of feedstock imports, production and logistics will somewhat ease supply tightness. 

According to SMM assessments, prices of cobalt (II, III) oxide gained 5,000 yuan/mt on the week to 205,000-215,000 yuan/mt, buoyed by higher prices of cobalt salts. 
Some purchases from lithium cobalt oxide (LCO) plants that produced for the fulfilment of pre-holiday long-term contracts also supported prices of cobalt (II, III) oxide. 

SMM assessed prices of ternary precursor NCM523 at 86,000-89,000 yuan/mt for the week ended February 21, up 5,000 yuan/mt from a week earlier, and prices of NCM622 at 88,000-92,000 yuan/mt, 2,500 yuan/mt higher on the week. 
The increase in cobalt salts prices also boosted prices of ternary precursor. Most ternary precursor plants, except for those in Hubei, have restarted work, but the operations will be sluggish until the end of the month. Tight feedstock inventories drove some major producers of ternary materials to procure ternary precursor at higher prices, but the procurement volumes were limited. 

SMM assessed prices of both battery- and industrial- grade lithium carbonate flat on the week, standing at 47,500-50,500 yuan/mt and 37,000-40,500 yuan/mt, respectively.
Smelters of lithium carbonate tended to raise offers last week given logistics curbs that have disrupted supplies, but the higher quotes barely accepted by downstream consumers amid slow resumption of operating rates. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) also unchanged on the week at 52,000-58,000 yuan/mt. 
Shipments from major producers remained steady, while trades were hardly struck at medium-scale and small mills. There remains upward potential in lithium hydroxide prices as high-nickel material plants will commence a new round of feedstock procurement this week. 

Prices of LCO, which is used to produce 4.35V batteries, increased 10,000 yuan/mt on the week to 205,000-225,000 yuan/mt, SMM assessed.
Nearly all LCO producers have returned from holidays. Higher prices of raw materials lifted LCO prices, while enquires from downstream battery producers remained limited, with only several major plants stepping up purchases. 

Prices of ternary material NCM523 advanced 1,500 yuan/mt from a week earlier to 127,000-139,000 yuan/mt, with prices of NCM622 stabilising at 145,000-153,000 yuan/mt, SMM assessed. 
Downstream demand from battery producers stayed weak, which saw some ternary material producers extending their suspension. Transactions were thin as some continued transportations curbs deterred cargo shipments. 

SMM assessments showed that prices of LFP used in power batteries flat on the week at 39,000-42,500 yuan/mt.
LFP plants outside Hubei have recovered production, while downstream purchases were mostly under long-term contracts with battery plants. SMM expects the resumption of battery production to lift orders to normal levels until end February. 

Prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries and prices of LMO used in power batteries remained unchanged on the week, at 22,000-31,000 yuan/mt and 34,500-36,500 yuan/mt, respectively.
The slow increase in operating rates of downstream battery producers continued to delay the resumption of some LMO plants.