Cobalt, lithium prices weakened as COVID-19 outbreak overseas hurt consumer battery export from China

SHANGHAI, Mar 31 (SMM) – China’s exports of consumer batteries showed signs of softening amid reduced overseas demand and COVID-19 lockdowns as the outbreak escalated in the European countries, the US, India and South Africa, which are major export destinations of China’s power tools, power banks and electronic devices. 

Chinese producers of lithium manganese oxide (LMO) prioritised the consumer battery market, but a great number of orders have been cancelled recently, which may significantly depress shipments of LMO batteries in April compared with March. The gradual resumption of production and demand in China will drive consumer battery producers to the domestic market, and therefore intensify the market competition.

On the power battery front, export orders at major battery makers in China will be further reduced due to the factory shutdown of European carmakers. South Korean giants LG Chem and Samsung SDI have closed their EV battery plants in the US due to the COVID-19 pandemic, and this will also hit demand for Chinese raw materials. 

The development of COVID-19 outbreak in Africa may determine cobalt prices in the near future. If the virus impact fades in Africa, weak downstream demand will return to reign in the market and weigh on cobalt prices. 

Prices of battery-grade lithium carbonate struggled against the headwind of weaker-than-expected increase in power battery demand, which has shown signs of further weakness. SMM expects Chinese producers of lithium carbonate to adjust their operating rates in the near term.

Besides, demand from consumer batteries seems to have lost steam with the global spread of coronavirus and this adds to downsides risks in industrial-grade lithium carbonate prices. On the one hand, reduced demand from consumer batteries grew inventory pressure of industrial-grade lithium carbonate, and on the other, muted trades in the power battery market has prompted some battery-grade lithium carbonate plants to shift capacity to industrial-grade materials.

Prices of refined cobalt slowed their declines in the week ended March 27, falling 6,500 yuan/mt from the previous week to 244,000-258,000 yuan/mt, while prices of cobalt hydroxide held stable at $9.8-10.6/lb, SMM assessed.
Refined cobalt prices stemmed the slide in the second half of last week as stimulus measures from central banks and governments lifted market sentiment and concerns about raw materials export disruption from major supplier Congo intensified. However, the prices still lack any upward momentum due to an estimated 15% decline in overseas orders. Trades in the cobalt hydroxide market remained sluggish amid slow demand both at home and abroad. Domestic smelters have sufficient raw materials for near-term production while the feedstock imports shrank. 

SMM assessed the average prices of cobalt sulphate at 44,500-47,500 yuan/mt last week and prices of cobalt chloride at 56,500-59,500 yuan/mt, down 3,500 yuan/mt and 2,500 yuan/mt, respectively, from a week ago. Prices of battery-grade nickel sulphate lost 250 yuan/mt on the week to 22,000-23,000 yuan/mt.
Sellers of cobalt salts tended to firm up offers last week on the news about potential ore export restrictions from Africa, but the higher offers were hardly accepted by downstream consumers. 

According to SMM assessments, prices of cobalt (II, III) oxide fell 9,000 yuan/mt on the week to 190,000-195,000 yuan/mt, on the backdrop of continued declines in cobalt salt prices.
Weak demand may expand the downsides in cobalt (II, III) oxide prices despite a high concentration ratio of the market. 

SMM assessed prices of ternary precursor NCM523 at 76,000-79,000 yuan/mt for the week ended March 27, down 4,500 yuan/mt from the prior week, with prices of NCM622 dipping 5,500 yuan/mt to 82,000-85,000 yuan/mt.
Consumption from the power battery market has yet to pick up, and ternary materials plants postponed their purchases of ternary precursor for April. Producers of ternary precursor were compelled to cut prices to close to their production costs as battery plants demanded lower prices.

SMM assessed prices of battery-grade lithium carbonate 750 yuan/mt lower on the week, standing at 46,500-49,000 yuan/mt, with prices of industrial-grade materials stabilising at 38,000-42,000 yuan/mt.
Transactions of battery-grade lithium carbonate remained muted on a delay in demand resumption from the power battery market. Better demand and supply fundamentals supported prices of industrial-grade lithium carbonate, but the near-term prices could also face downside risk as some battery-grade lithium carbonate plants have shifted their capacity to industrial-grade materials as the COVID-19 outbreak seems to have weakened consumer battery demand.

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) unchanged on the week at 53,000-59,000 yuan/mt.
Purchases of battery-grade lithium hydroxide were limited, except for some trades under long-term contracts, as major battery companies in China reduced demand for high-nickel materials. Top lithium hydroxide producers have stable export orders, while medium-scale and small lithium salts producers delayed the resumption of production lines amid weaker-than-expected consumption. 

Prices of LCO, which is used to produce 4.35V batteries, lost 2,500 yuan/mt from a week ago to 215,000-220,000 yuan/mt, in line with declines in raw materials prices. 
Downstream consumer battery producers maintained normal operations, but some battery plants kept from making new purchases on worries about the COVID-19 impact on end-users' demand. LCO prices could further trend downwards on reduced orders. 

Prices of ternary material NCM523 declined 2,000 yuan/mt last week, to 124,000-132,000 yuan/mt, with prices of NCM622 1,500 yuan/mt lower on the week at 145,000-150,000 yuan/mt, SMM assessed.
Market participant showed concerns about weakening global demand as the COVID-19 pandemic has led to the shutdown of Japan and South Korea’s battery plants, which are major export destinations of Chinese ternary materials. 

SMM assessments showed that prices of LFP used in power batteries flat on the week at 39,000-42,500 yuan/mt, underpinned by a gradual increase in demand from the energy storage market. 

Prices of LMO used in high-energy-density lithium-ion batteries shrank 500 yuan/mt on the week to 21,500-30,500 yuan/mt as of March 27, with prices of LMO used in power batteries remained unchanged at 34,500-36,500 yuan/mt.
LMO plants tried to secure orders from the digital battery market by lowering prices, after the virus impact resulted in the cancellation of export orders at some digital battery mills. The downsides in LMO prices, however, will be capped as current prices have slipped close to costs.