Chinese cobalt salt producers to cut production as demand fails to pick up

SHANGHAI, Apr 27 (SMM) – Several cobalt salt producers in China, including a leading firm, plan to scale back operations in May, SMM learned, as downstream sectors are cutting output with the COVID-19 crisis battering global economies, and also due to high costs and raw material supply disruptions.

SMM expects cobalt salt production in China to shrink 20-40% next month, which will counter the demand loss of 20-40% from electric vehicle battery and 3C consumer device battery sectors and offer some support to prices of cobalt salts in China.

Prices of cobalt sulphate and chloride in China have stemmed their declines in recent two weeks, staying at lows of the year, as producers held back on sales to support the market. SMM assessed prices of cobalt sulphate at 44,000-47,000 yuan/mt as of Monday April 27, and prices of cobalt chloride at 53,000-56,000 yuan/mt.

A slump in orders, meanwhile, forces consumers of cobalt salts—producers of ternary precursor, lithium cobalt oxide and tricobalt tetraoxide—to scale back operations next month. The production curtailment by a leading EV battery producer has taken its toll on its ternary material suppliers, and inventories of finished goods at ternary precursor producers resumed their increases.

As for the 3C consumer device sector, a leading battery producer will trim output in May due to reduced orders, after keeping output barely changed in April. Planned lithium cobalt oxide production for May declines about 30% from April, while cuts at tricobalt tetraoxide producers would stand at 20-50%, according to an SMM survey.

High costs for raw materials and supply shortages are also vexing cobalt salt producers in China. Resumed deliveries of cobalt raw materials, including raw ore, concentrate and intermediates from Africa after South Africa in May eases its virus lockdown that has been in place since March 27, are unlikely to arrive at China until mid-June. Potential port congestion and lingering restrictions on transportation from the DC Congo to South Africa, meanwhile, will slow the recovery of cobalt raw materials deliveries to China.

Cobalt salt producers who extract cobalt from finished batteries are also mulling production curtailments for the coming month, as the prospects of new orders are bleak and as recycled battery traders hold their quotes firm on limited availability caused by low operating rates across battery producers.