[SMM Analysis] High Cobalt Price suddenly falls off Cliff Market pessimism triggers panic Wave

SMM News: the two days after May Day, for the cobalt industry, is unforgettable.

In just two days, cobalt prices, which have been rising for nearly two years, suddenly fell 30, 000 yuan per ton, or 4.5 percent, from 662500 yuan per ton to 632500 yuan per ton.

Such a rapid head-on blow, in the cobalt market, has not been seen in recent years, directly reflected in the market is the sharp decline in the share price of cobalt-related enterprises.

From May 2 to 4, the share price of cobalt giant Huayu Cobalt fell to 99.59 from 113.73 in three days, a total decline of 12%;

Over the same period, Hanrui Cobalt shares fell from 166 to 147, a total decline of 11.4%;

For other industries, there may be a total decline of more than a dozen in three days, but as a cobalt enterprise with both revenue and net profit growth, it is probably only in the face of a rare international trade war that there will be such a big decline.

As the cobalt price, which has nearly tripled in two years, has exploded all the way. why did the engine of growth suddenly lose its power during this May Day period?. In fact, long before May 1, the decline in cobalt prices has begun to show signs.

According to a survey in the weekly cobalt lithium spot report released by SMM on April 27, "recently, the digital market has shown signs of fatigue, only a material factory in the south has said that orders in the digital market are better, and the rest of the upstream manufacturers of the digital electronics industry chain have expressed weak demand. Orders for May continued to be weak. In the power market, battery factories and material factories are actively making new preparations for the new model product catalogue, and the high nickel demand for ternary materials in power battery factories and whole car factories will be reflected in the 622 model this year. The promotion and application of the 811 model in the power market may be realized as early as mid-2019. Therefore, the recent widening of the product price range in the ternary material market is mainly due to the fact that the performance of the products of first-line manufacturers is better, the performance-to-price ratio of 523 products is not lost by 622, and the price is relatively strong, still standing at 230000 yuan / ton. However, the quotations of small and medium-sized manufacturers are uneven in the context of downstream demand adjustments, "the spokesman said. Meanwhile, SMM analysts expect cobalt prices to remain volatile in the second quarter. "View details: [SMM Cobalt Lithium spot Weekly] downstream demand Adjustment period Cobalt Lithium Price volatility downward

On the other hand, the reduction in downstream demand has led to a decline in demand for cobalt, and the foreign media cobalt price has ended nearly a year's rise and declined for the first time, which has a great impact on the speculative market and the mentality of hoarders. Speculators and hoarders are selling in an effort to reduce risk. SMM believes the fall in cobalt prices is directly related to weak downstream demand in May. "View details: [SMM Cobalt Lithium spot Weekly] downstream orders insufficient Cobalt Lithium Price continues to decline

At the same time, the order situation of ternary material manufacturers is polarized, and enterprises with good orders are limited to their own production capacity and are unable to express the actual demand for upstream raw materials. However, the decline in the demand for upstream raw materials from ternary material manufacturers with insufficient orders is very significant.

As for electrolytic cobalt, the foreign media finally could not stand the flat signal to reflect the fatigue performance of speculators, and panic spread to overseas spot purchases, and there was a slight drop in quotations, which even stimulated the killing and falling behavior of domestic speculators. Due to the excessive increase in the early stage, speculative traders took the initiative to lower the price to protect profits, but the buyers were not sincere, most of the downstream to digest inventory to avoid risk, the overall market is only now quoted downward but not traded. Although the quotation of mainstream production enterprises is still high, but there is no downstream purchase inquiry, the price of SMM electrolytic cobalt is 62-645000 yuan / ton, the average price is down 30, 000 yuan / ton compared with last week.

In a discussion with analysts on revenue on Thursday, Mr. Musk said Tesla would reduce its reliance on cobalt resources, Bloomberg reported on May 7. The company has cut its share of cobalt in batteries, which is a very expensive metal. "We think access to cobalt resources is still difficult," Mr Musk said. Tesla Battery Cobalt reduction Adjustment of Global Cobalt supply is not optimistic

There is a view in the market that Tesla, as a major user of cobalt downstream, has adopted a plan to reduce cobalt and increase nickel, which may lead to a further decline in the entire cobalt price. in an interview with industry celebrities, SMM believes that Although the cobalt reduction plan of terminal electric vehicle giant Tesla will reduce the demand for cobalt in the downstream car market, the demand for cobalt in the entire industry is still very large, and the cobalt price is still optimistic in the long run with limited cobalt resources. Therefore, the reduction in cobalt demand from Tesla may not necessarily lead to a sharp decline in cobalt prices in the next round.

According to the feedback from the stock market, although the share prices of cobalt-related enterprises have fallen after May 1, according to the stock prices have rebounded in the past two days, for example, Huayu Cobalt Industry rose 2.63% on May 7 and Hanrui Cobalt Industry rose 3.76% on the same day.

So SMM analysts predict that cobalt prices may show a new normal of continued volatility in the second quarter.