LME Week: Chinese lithium, cobalt prices to see downside in near term

LONDON, Oct 9 (SMM) – Chinese lithium and cobalt prices have started to lose some of their sheen as capacity bottlenecks ease, said SMM general manager, Ian Roper. "Lithium prices in particular should see more downside near term as new processing capacity continues to be added.”

Speaking to delegates at the LME week in London, he said that lithium saw tight supplies last year, but bottlenecks have eased. Oversupply of lithium carbonate exerted pressure on lithium prices. "As lithium battery manufacturers have been destocking since the fourth quarter of 2017, lithium carbonate prices have dropped", he added.

SMM assessments showed that prices of battery-grade domestic lithium carbonate averaged 79,000 yuan/mt as of Tuesday October 9, down over 50% from 164,000 yuan/mt at the beginning of the year. Prices of battery-grade domestic lithium hydroxide declined some 12.5% and averaged 130,000 yuan/mt as of October 9.

In the first half of 2018, China imported 96,000 mt of LCE (lithium carbonate equivalent), up 73% year on year, SMM data showed. This grew LCE inventories by over 60,000 mt. 

As more processing capacity comes online in the fourth quarter, hydroxide prices are likely to follow carbonate prices lower given current processing costs of some 10,000 yuan/mt.

Chinese cobalt prices declined from May. SMM believes that cobalt prices will fluctuate between 300-400 yuan/kg. "We see the market being well supplied into next year, with no major structural deficit until 2020," Roper said.

On electric vehicles (EV), Roper believes that policy direction remains the key driver for China’s EV development.