Lower demand from power batteries to extend declines in cobalt, lithium prices

Published: Jun 24, 2019 13:57

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Carmakers stood on the sidelines before the transition period for NEV subsidy ends this week on Jun 25

SHANGHAI, Jun 24 (SMM) – Pressure from lower demand in the power battery market will be gradually felt on the raw materials end, which is set to push smelters and miners to lower prices in the third quarter.

SMM retains its outlook that prices of cobalt ore will trend downsides, and the spread between domestic, overseas prices of cobalt will narrow as the foreign market declines. Domestic prices of lithium ore, salts will face downward pressure as demand falls.

Carmakers took a wait-and-watch stand before the transition period for new energy vehicle (NEV) subsidy ends this week on June 25. Pressure from costs may hike prices of some models, and push automakers to build their own battery factories. Downstream demand for NEVs waned after a clutch of widely reported fires recently.

Growth of the NEV market will continue to be driven by the passenger vehicle sector, but slower growth will affect demand for ternary batteries. The share of lithium iron phosphate (LFP) batteries in the special vehicle market expanded steadily, with the energy storage market also growing demand.

Cathode material producers reported fewer orders from battery plants for June, which are likely to continue through the third quarter.

The shuffle in the power battery market lowered prices of cylindrical batteries, with further downside room in the short term.

As of Friday June 21, offers of type 18650 products with a capacity of 2,500 mAh stood at 4-7.5 yuan/unit, with offers of cylindrical batteries in electric bicycle market down to 4 yuan/unit.

Speculative demand and consumption of spot cobalt metal remained slow last week. Downstream buyers kept procuring cautiously, but major domestic producers held offers steady. Importers lowered offers to spur sales.

Smaller profit margins across smelters and bearish outlook in the market depressed purchases of cobalt intermediate products. This drove suppliers of cobalt hydroxide to cut offers, but still above the psychological level of prices for consumers. SMM expects offers to further decline in the short term.

SMM assessed prices of refined cobalt at 233,000-248,000 yuan/mt in the week to Friday June 21, down an average 7,000 yuan/mt from the previous week. Prices of cobalt hydroxide stood at $8.9-9.2/lb, down an average $0.3/lb.

Pessimism in the cobalt salt market lingered despite production cuts, as expectations of poorer demand extended the decline in prices.

Prices of cobalt sulphate came in at 39,000-41,000 yuan/mt, down an average 1,000 yuan/mt, and prices of cobalt chloride lost an average 2,000 yuan/mt on the week, to 45,000-47,000 yuan/mt, according to SMM assessment. Prices of nickel sulphate came flat on the week, at 23,500- 26,000 yuan/mt.

Prices of cobalt (II, III) oxide continued to fall as major producers lower offers to boost purchases amid growing worries on lower prices of raw materials. SMM assessed prices of cobalt (II, III) oxide at 166,000-174,000 yuan/mt, down an average 4,000 yuan/mt on the week.

Trades of ternary precursor also occurred at lower prices as the prospect of lower downstream demand intensified, and production cuts failed to improve market sentiment.

In the week to June 21, prices of NCM523 lost an average 2,000 yuan/mt on the week, standing at 77,000-79,000 yuan/mt, and prices of NCM622 dipped 1,000 yuan/mt, to stand at 83,000-85,000 yuan/mt.

Prices of lithium carbonate fell last week as demand for ternary batteries shrank considerably before the grace period for NEV subsidy cuts ends on June 25.

SMM learned that battery-grade lithium carbonate producers received fewer orders for July, and spot trades were also limited last week. Industrial-grade lithium carbonate plants see lower prices in July as consumption weakened. Producers of industrial-grade lithium carbonate currently produce for the delivery of orders in early-June.

SMM assessed prices of battery-grade lithium carbonate at 73,000-76,000 yuan/mt, down an average 2,000 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 65,000-68,000 yuan/mt, down 1,500 yuan/mt from a week ago.

Last week, prices of battery-grade lithium hydroxide continued to trend downwards as battery producers shifted the demand for 6-series cathode materials to 5-series on the approaching official subsidy cuts on NEVs. SMM learned that a quiet domestic market may drive lithium hydroxide producers to overseas markets in Japan and South Korea.

As of Friday June 21, prices of battery-grade lithium hydroxide (coarse particle) shrank an average 1,500 yuan/mt on the week, to stand at 83,000-86,000 yuan/mt, SMM assessed.

Despite stable demand from the digital, electronic sector, expectations of lower raw materials prices kept battery producers from purchasing and this depressed prices of lithium cobalt oxide (LCO).

SMM assessed prices of LCO used to produce 4.35V batteries at 210,000-220,000 yuan/mt, down an average 2,000 yuan/mt from the previous week.

Poorer consumption from battery mills also extended sales promotion across sellers of ternary materials, as prices of NCM523 materials fell 1,000 yuan/mt on the week, to stand at 131,000-139,000 yuan/mt, and prices of NCM 622 also shrank 1,000 yuan/mt, posting 147,000-154,000 yuan/mt.

Prices for lithium iron phosphate (LFP) remained unchanged last week as the market performed stably after experienced a shuffle in 2018. Prices of LFP used in power batteries stood at 47,000-52,000 yuan/mt in the week to June 21, SMM assessed.

Prices of lithium manganese oxide (LMO) fell slightly amid stable trades last week. New policies that require license plates for using electric bicycles bolstered demand for high-end LMO applied in high-energy-density lithium-ion batteries. But demand for medium- to low- end LMO from the traditional electronic sector waned in a slow season.

SMM assessed prices of LMO, used in high-energy-density lithium-ion batteries, dipped an average 1,000 yuan/mt on the week, to stand at 30,000-39,000 yuan/mt, and prices of LMO used in motive batteries at 47,000-50,000 yuan/mt, flat on the week.

Market commentary Cobalt Lithium

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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