Cobalt, lithium prices under new round of pressure amid ternary battery output cuts

SHANGHAI, Nov 11 (SMM) – Bearish outlook in the market and continued declines in spot quotes will keep near-term cobalt prices under pressure, SMM expects. 

Sluggish demand from the new energy sector triggered production cuts of ternary power batteries, which is set to slash demand for lithium salts. This, coupled with intensified competition among domestic and overseas smelters, will also weigh on lithium prices in the weeks ahead. 

Limited increase in demand from the new energy vehicle (NEV) sector weighed on production at major ternary power battery producers from the second half of October, which may lead to a lower operating rate of 40% for the ternary battery industry in November, market participants told SMM.

According to SMM database, about 82,000 NEVs obtained qualification certificates in China in October, up 8.5% from a month ago. New energy passenger vehicles accounted for the greatest share of 86.8%, while new energy busses took up the smallest 3.7%. Production of NEVs with qualification certificates stood at 913,000 units in January-September. 

Installed power battery capacity also picked up marginally, by 3.1% on the month to stand at 4.1GWh in October. Among this, ternary batteries accounted for 72.5% and lithium iron phosphate (LFP) batteries made up 25.9%.

SMM sees less buying interest for NEVs after national subsidy cuts and limited growth of demand for commercial vehicles in a saturated market raising the likelihood of a year-over-year decline in NEV production in 2019. 

SMM continued to lower its estimates of China’s NEV production this year to 1.25 million units. 

Last week, prices of refined cobalt extended their decline amid intensified competition as overseas suppliers actively sought sales opportunity in China. 

Failure to reach an agreement between suppliers and buyers about discounts under long-term contracts for next year also depressed spot prices of cobalt hydroxide. 

SMM assessed traded prices of refined cobalt at 270,000-285,000 yuan/mt in the week of November 8, down 10,000 yuan/mt on the week, with prices of cobalt hydroxide dipping $0.2/lb to stand at $10.7-11.7/lb.

Prices of cobalt and nickel salts continued to fall last week as producers cut offers to clear inventories amid weak downstream demand. Consumption will unlikely to pick up before year-end. 

SMM assessed the average price of cobalt sulphate lost 4,500 yuan/mt from a week ago to 49,000-53,000 yuan/mt, with prices of cobalt chloride slipping 7,000 yuan/mt to come in at 62,000-67,000 yuan/mt. Prices of battery-grade nickel sulphate shrank 500 yuan/mt on the week to 29,500-30,000 yuan/mt.

Prices of cobalt (II, III) oxide weakened as downstream producers of lithium cobalt oxide (LCO) demanded lower quotes on the expectations of cooler demand from the digital sector. 

According to SMM assessments, prices of cobalt (II, III) oxide dropped 14,000 yuan/mt on the week to 206,000-216,000 yuan/mt, and are poised for further declines in the weeks ahead. 

Falling feedstock prices and weak downstream orders further weighed on prices of ternary precursors. For the week ended November 8, SMM assessed prices of NCM523 at 92,000-97,000 yuan/mt, down 5,000 yuan/mt from a week ago, with prices of NCM622 down 3,000 yuan/mt on the week to 103,000-107,000 yuan/mt. 

Prices of lithium carbonate stemmed their slide from a week ago. However, overall demand for lithium salts will face significant downward pressure with ternary battery mills kicking off a new round of output cut.  

Record high production of LFP provided limited support to the demand for lithium carbonate, as LFP batteries only took a smaller market share below 30% in the power battery market and it requires less lithium carbonate to produce per mt of LFP, compared to producing per mt of ternary materials.

Automakers’ psychological price level for battery raw materials will be lower next year on the prospect of deepened cuts to subsidies.

Last week, SMM assessed prices of industrial-grade lithium carbonate at 47,000-50,000 yuan/mt and prices of battery-grade lithium carbonate at 57,000-59,000 yuan/mt, both flat on the week. 

SMM learned that prices of lithium carbonate close to the battery-grade fell to as low as 52,000 yuan/mt. Prices are expected to remain under pressure as the negotiation for annual purchasing contracts commences in the fourth quarter. 

Prices of lithium hydroxide held stable last week, but the prospect for downstream demand remained bleak as strong nickel prices deterred the progress towards high-nickel content batteries and damped purchases by top battery producers.

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) at 61,000-64,000 yuan/mt, unchanged from a week ago.

Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, shed 6,000 yuan/mt week on week to 233,000-243,000 yuan/mt, as small and medium-sized producers reduced offers. There is further downside room expected in LCO prices. 

The price range of ternary materials widened last week with prices of products for both digital devices and power batteries slipping on poor demand. 

SMM assessed prices of NCM523 down 5,000 yuan/mt from a week earlier to 142,000-148,000 yuan/mt and prices of NCM622 down 3,000 yuan/mt, to 160,000-165,000 yuan/mt.

Prices of LFP material remained steady last week, with producers boosting sales to compensate for small margins as downstream producers managed to reduce feedstock costs. Suppliers of high-quality LFP products tended to hold prices at highs, but other suppliers lowered offers to destock amid intense competition.

SMM assessments indicated that prices of LFP used in power batteries were unchanged on the week at 42,500-45,500 yuan/mt.

Stable supply and demand kept prices of lithium manganese oxide (LMO) little changed last week. SMM assessed prices of LMO used in high-energy-density lithium-ion batteries at 26,000-32,000 yuan/mt and prices of LMO used in motive batteries at 43,000-45,000 yuan/mt.

SMM sees prices of LMO facing downward pressure in the short term as downstream markets enter a traditional slow season from mid-November.