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Cobalt salts prices ease after rally, downstream destocking continues 

iconJul 29, 2019 12:00
Slow recovery of battery demand to keep prices of cobalt salts languishing near the bottom

SHANGHAI, Jul 29 (SMM) – Prices of cobalt salts bottomed out after upticks last week as current fundamentals could barely support a price rally while suppliers raised offers. SMM expects the slow recovery of battery demand to keep prices of cobalt salts languishing near the bottom, and prices of lithium salts may face continued downward pressure. 

Pessimism after full subsidy cuts drove downstream automakers and battery producers to update their technical routes, with some major battery mills considering adding lines for lithium iron phosphate (LFP) batteries. This reflects the market’s bet on advantages of LFP batteries such as safety performance, long service life, and low costs. 

Ternary batteries, meanwhile, will remain dominant in the electric vehicle (EV) market. Cost-oriented consumption for power batteries will gradually mature and stabilise as China phases out EV subsidies. 

Fast expansion of downstream capacity in the first half of the year helped step up destocking at battery mills and cathode materials producers. Orders from EV models equipped with high-nickel batteries were placed in the first half of the year. SMM learned that recent production of high-nickel ternary batteries was supported by picking-up demand. 

Consumption for consumer batteries remained slow amid a slack season of the digital, electronics market. Prospect of a 5G demand rally next year will keep consumption of lithium cobalt oxide (LCO) batteries sluggish from traditional sectors in the second half of this year. 

Prices of refined cobalt extended their declines as sellers failed to hike offers amid pessimistic outlook across downstream consumers. Downstream buyers barely purchased and mostly consumed their inventories. Producers of cobalt hydroxide were keen to sign long-term contracts with downstream consumers in the third quarter, and this also lowered spot prices of cobalt hydroxide. 

SMM assessed prices of refined cobalt flat from a week ago, at 213,000-225,000 yuan/mt in the week to Friday July 26. Prices of cobalt hydroxide stood at $7.5-7.7/lb, down an average $0.1/lb.

Prices of cobalt salts retreated on lower overseas prices in the second half of last week, after improved inquires rallied prices in the first half of the week. Actual trades were limited. SMM expects that the prices have bottomed out. 

Prices of cobalt sulphate came in at 36,000-38,000 yuan/mt in the week to Friday July 26, and prices of cobalt chloride at 42,000-44,000 yuan/mt, both up an average 1,000 yuan/mt from a week ago, according to SMM assessment. Prices of nickel sulphate held flat at 24,000-27,500 yuan/mt.

Stabilised downstream consumption kept prices of cobalt (II, III) oxide barely changed at 145,000-148,000 yuan/mt last week. 

Prices of ternary precursor nudged up on higher prices of cobalt salts, but downstream purchases did not improve. 

In the week to Friday July 26, prices of both NCM523 and NCM622 climbed 500 yuan/mt on the week, to stand at 71,000-74,000 yuan/mt and 77,000-80,000 yuan/mt, respectively.

Demand for battery-grade lithium carbonate remained weak, with consumers mostly procuring to fulfil long-term contracts. Other purchases were made in small volume given the current downward trend in prices. Consumption of industrial-grade lithium carbonate, however, was underpinned by growing markets of LFP and lithium manganese oxide (LMO) material. 

Some producers told SMM that they are likely to shift capacity from battery-grade lithium carbonate to industrial-grade materials if margins continue to fall.  

SMM assessed prices of battery-grade lithium carbonate at 67,000-70,000 yuan/mt, down an average 2,500 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 62,000-64,000 yuan/mt, down 500 yuan/mt from a week ago.

Last week, prices of battery-grade lithium hydroxide also trended downwards as downstream demand from high-nickel batteries resumed slower than expected. 

As of Friday July 26, prices of battery-grade lithium hydroxide (coarse particle) shrank an average 2,500 yuan/mt on the week, to stand at 75,000-79,000 yuan/mt, SMM assessed.

Stable purchases of LCO by battery producers drove some ternary materials mills to transfer capacity to LCO. SMM assessed prices of LCO used to produce 4.35V batteries at 185,000-195,000 yuan/mt, unchanged from the previous week.

Producers of ternary materials remained keen to destock as orders were thin, expect that for high-nickel ternary materials, amid slow recovery at battery mills. 

SMM assessed that prices of NCM523 materials held stable at 125,000-133,000 yuan/mt last week, and prices of NCM 622 also stood flat at 141,000-148,000 yuan/mt.

Slower-than-expected resumption of power battery production capped sells of LFP used in power batteries, but the shipment remained higher than that of LFP used in high-energy-density lithium-ion batteries. Falling prices of lithium carbonate also depressed upward momentum in LFP prices, despite high prices of yellow phosphorus, a raw material to produce LFP. 

In the week to Friday July 26, prices of LFP used in power batteries stood at 46,000-49,000 yuan/mt, flat from the previous week, SMM assessed.

Prices for lithium manganese oxide (LMO) used in high-energy-density batteries edged down as the market share was squeezed by other battery materials even as downstream demand expanded. This, together with limited demand from the power battery market, also dragged on prices of LMO used in motive batteries.

SMM assessed prices of LMO, used in high-energy-density lithium-ion batteries, lost an average 500 yuan/mt to stand at 29,000-36,000 yuan/mt, and prices of LMO used in motive batteries fell 1,000 yuan/mt on the week to 46,000-48,000 yuan/mt.

Market commentary

For queries, please contact Michael Jiang at michaeljiang@smm.cn

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