Bullish sentiment lifted cobalt prices, battery-grade lithium hydroxide in tight supply

SHANGHAI, Jan 13 (SMM) – Increase in seaborne prices of cobalt boosted domestic cobalt prices last week. Concerns about an upward trend in prices led to some restocking demand, which in turn supported the cobalt price rally. Producers of cobalt salts firmed up offers despite thin trades pre-holiday. 

Decline in prices of lithium carbonate slowed while stockpiling from downstream material producers drew to an end and dampened demand for lithium carbonate. 

Downstream demand remains determinant of cobalt prices in the future despite bullish prospects for prices before the Chinese New Year holiday. Large-scale maintenance at lithium carbonate smelters during the holiday will reduce inventories, but a lack of significant improvement in fundamentals could continue to keep prices weak. 

According to SMM database, about 1.18 million new energy vehicles obtained qualification certificates in China in 2019, 4% lower from a year ago. New energy passenger vehicles accounted for the greatest share of 86.9%, while new energy special vehicles took up the smallest 6.2%. 

The capacity of installed power batteries increased last year, by 8.7% to stand at 62.2GWh. Among this, ternary batteries accounted for 65.4% and lithium iron phosphate (LFP) batteries made up 32.3%.

Due to subsidy phase-down, China’s NEV production declined year on year for the fifth consecutive month in December, despite frontloading production at year-end. This resulted in negative growth in the full-year production in 2019, with the output of new energy buses and special vehicles falling 14.5% and 31.1%, respectively, from a year ago. 

SMM forecasts China’s NEV and power battery markets to see four major types of roadmaps in 2020, which are high-nickel ternary battery system preferred by automaker Tesla, LFP battery system favoured by BYD, cost reduction driven by technology advancement, and expansion of joint venture carmakers and foreign battery producers. 

SMM estimates a rebound of 22.6% in China’s production of NEVs in 2020, standing at 1.43 million units. Output growth is expected to pick up from 2022, with China’s NEV production likely exceeding 7 million units by 2025. 

In the week ended January 10, prices of refined cobalt edged up by 10,000 yuan/mt from a week ago to 272,000-280,000 yuan/mt, with the improved speculative sentiment, SMM assessed. Prices of cobalt hydroxide remained flat on the week at $9.4-10.2/lb.

Increase in overseas offers of refined cobalt drove major producers in China to lift prices. But higher seaborne prices failed to buoy domestic prices of cobalt hydroxide, on the back of limited procurement by downstream producers.

SMM assessed the average prices of cobalt sulphate at 47,500-49,000 yuan/mt last week, 2,750 yuan/mt higher than a week earlier, with prices of cobalt chloride rising 2,250 yuan/mt, to stand at 56,000-57,500 yuan/mt. Prices of battery-grade nickel sulphate, meanwhile, fell 250 yuan/mt on the week to 24,500-25,000 yuan/mt. 

Producers of cobalt salts raised prices on limited inventories, trying to make up for their previous losses. Bullish prospects for cobalt prices dominated the market. This, together with some new orders, prompted downstream producers to restock. 

According to SMM assessments, prices of cobalt (II, III) oxide also climbed, by 11,500 yuan/mt last week to 180,000-190,000 yuan/mt, due to higher prices of cobalt salts and insufficient inventories of cobalt (II, III) oxide.

Optimistic demand outlook from 5G boosted bullish sentiment about cobalt prices. New orders at downstream lithium cobalt oxide (LCO) plants and expectations of logistics suspension this week also accounted for the improved trades and elevated prices. SMM forecasts transactions to cool this week, but prices of cobalt (II, III) oxide may continue to edge higher if overseas prices extend their increase. 

For the week ended January 10, SMM assessed prices of ternary precursor NCM523 at 79,000-82,000 yuan/mt, up 2,500 yuan/mt on the week, with prices of NCM622 stabilising at 86,000-89,000 yuan/mt. 

Higher cobalt prices were the driver behind the rise in ternary precursor prices. Trades were muted last week as most downstream ternary material plants finished restocking before January 1. SMM expects prices of ternary precursor to hold steady before the Chinese New Year holiday. 

SMM assessed prices of battery-grade lithium carbonate at 47,000-50,500 yuan/mt, and prices of industrial-grade lithium carbonate at 37,000-40,000 yuan/mt, both down 1,000 yuan/mt on the week amid subdued transaction activity. 

There remain some demand from cathode material producers till mid-January, and trades are more likely to occur at low prices in cash. 

The price range of battery-grade lithium carbonate widened on the back of industry-wide production cuts in the power battery market, albeit decent demand from the digital battery sector. Suppliers of feedstock spodumene and mica also cut offers to destock. Producers of high-quality battery-grade lithium carbonate have problems selling cargoes, but they are not willing to slash prices in order to secure market share. A slew of ore smelters carried out maintenance for the new year. They are expected to resume operation in the first half of February. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) remained flat on the week at 52,000-57,000 yuan/mt.

Prices of high-quality battery-grade lithium hydroxide held firm on the back of tight supply since end-December, SMM learned from market participants. There is no production cut schedule for the material during the upcoming holiday. 

Prices of LCO, which is used to produce 4.35V batteries, also held unchanged on the week at 195,000-210,000 yuan/mt, SMM assessed.

Downstream battery makers mostly halted production, leading to overall sluggish demand for LCO and subdued trades. 

SMM assessed prices of ternary material NCM523 and NCM622 remained unchanged on the week at 126,000-137,000 yuan/mt and 145,000-153,000 yuan/mt, respectively. 

Price increase in ternary precursor dampened demand from the downstream market. But demand remained solid for high-nickel ternary materials and at foreign producers. SMM expects prices of ternary materials to stabilise before the holiday. 

SMM assessments showed that prices of LFP used in power batteries flat on the week at 39,000-42,500 yuan/mt. 

Weakness in prices of lithium carbonate did not impact on prices of LFP materials as downstream purchases were also weak with battery makers shutting down for maintenance. SMM learned that some 90% of LFP producers have stopped production. 

SMM assessed prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries and prices of LMO used in power batteries limitedly changed on the week, at 22,000-31,000 yuan/mt and 34,500-36,500 yuan/mt, respectively. 

Some downstream battery plants concluded procurement last week for production of the last batch of products pre-holiday. LMO producers will shut down in mid-January for the holiday.