SHANGHAI, Jul 8 (SMM) – Cobalt prices are expected to see a smaller premium over cobalt salts in the third quarter of this year as slower new energy vehicle sales after subsidy cuts and weak performance in consumer devices amid a global downturn paint a bleak demand outlook.

Cobalt supply, meanwhile, is expected to grow in view of the resumption in Zambia, which is also likely to weigh on prices.

Prices of cobalt salts are expected to hover between 160,000-170,000 yuan/mt in Co content in the third quarter.

In the first half of 2019, SMM assessed that cobalt metal averaged 285,500 yuan/mt, down 53% from the same period last year.

The average price for cobalt sulphate dropped 57% to 54,300 yuan/mt, with that for cobalt chloride losing 57% to 62,800 yuan/mt and that for cobalt(II,III) oxide declining 56% to 201,600 yuan/mt.

An SMM survey showed that 22,300 mt in Co content of cobalt sulphate was produced in the first six months of the year, up 24% from January-June of 2018 and 11% from July-December of 2018.

This was driven by a greater number of recycling suppliers who use scrap as feedstock in Jiangxi and Sichuan as well as the recovery of a major producer in Jiangxi who use primary materials as feedstock.

Output of cobalt sulphate took a U-turn and dropped after April as poor demand from precursor producers and a weaker market overseas eroded profits among Chinese cobalt sulphate producers. Cobalt sulphate prices overseas slid faster than prices of cobalt raw materials, which generated a discount against Chinese prices.

Output of cobalt sulphate is expected to stand at 25,000 mt in Co content in the second half of the year, with output for the whole year rising 24%.

Output of cobalt chloride across China expanded 15% from a year ago and 18% from the second half of 2018 to stand at 15,100 mt in Co content in the first half of 2019, showed an SMM survey.

A leading producer in Zhejiang transferred its cobalt sulphate production line to the production of cobalt chloride, to produce Co3O4, which resulted in the growth in the overall cobalt chloride output.

Cobalt chloride production began a downtrend after May, as a low consumption season for consumer devices and a pessimistic outlook held buyers on the sidelines.

Output of cobalt chloride is expected to stand at 12,000 mt in Co content in July-December, which will create a 3% expansion in production for the year.

China produced 25,700 mt of Co3O4 in January-June, down 5% from the same period of 2018 and 4% from July-December last year, according to an SMM survey.

Improved industrial concentration and a deep cobalt discount against markets overseas frustrated small and medium-sized Co3O4 producers.

Co3O4 output at five Chinese producers exceeded 3,000 mt in the first half of the year, which accounted for 81.3% of the total.

The second half of the year is expected to see 26,000 mt of Co3O4 output, and the whole year is expected to see a drop of 4%.

With monthly average of over 20,000 mt, China’s output of ternary precursors expanded 65% from the first half of 2018 and 23% from the second half of last year to stand at 140,000 mt in the first half of 2019, showed an SMM survey.

Operating rates across Chinese producers of         ternary precursors, however, hovered at only 60%, due to overcapacity across the sector. Producers whose output exceeded 5,000 mt in January-June totalled 10, and their combined output accounted for 80% of the total.

Concentration ratio across ternary precursor sector is set to climb amid an industrial reshuffle after the government slashed subsidies.

Output of ternary precursors is expected to come in at 170,000 mt in the second half of the year, with an increase of 55% for yearly output.

Production of NCM 622 and 523 took up 69% of the total for January-June, but production of high-nickel NCM 811 gained compared to the start of the year.