Expected shutdown at Glencore's mine rallies cobalt prices on week

SHANGHAI, Aug 12 (SMM) – Support from demand will determine the upside room in cobalt prices after news about production halt at Glencore boosted the market, SMM believes. Resumed lithium production in Jiangxi province and steady release of new capacity in Sichuan may continue to grow pressure on lithium prices.

SMM data showed that about 73,500 new energy vehicles obtained qualification certificates in China in July. This was down 43% from a month ago and 18.3% from a year ago, marking the first year-over-year decline since the NEV sector emerged a few years ago. 

Poor performance in the pure electric passenger vehicle market accounted for the decline. China’s production of pure-electric passenger vehicles slid 55.8% from June and stood at 43,300 units in July. 

Installed capacity of power batteries also shrank last month, declining 29% month on month to 4.69GWh, with the year-over-year increase sliding to 26.9%. Among this, installed capacity of ternary batteries took up 44.8%, down 26.4 percentage points from June, while installed capacity of lithium iron phosphate (LFP) batteries accounted for 52.9%, up 27 percentage points from the prior month. The share of LFP batteries exceeded that of ternary batteries for the first time this year in July. 

SMM learned that operating rates across battery producers are only likely to resume limitedly in August as demand from electric vehicles remained weak. Major battery producers are expected to shift their focuses to the resumption of LFP battery capacity as the downstream automakers’ need to save costs becomes increasingly urgent after subsidy cuts. 

In the second half of last week, speculative buying of refined cobalt were boosted by news that mining company Glencore will halt production at its Mutanda mine, the world’s largest cobalt mine, from the end of this year. This extended increases in refined cobalt prices from the first half of last week as anticipations of demand recovery lifted prices. 

Some downstream producers have already locked in orders at major refined cobalt smelters until late-August. Spot trades were moderate on limited supplies and high offers last week. 

SMM assessed prices of refined cobalt climbed 6,000 yuan/mt from a week ago, to stand at 225,000-235,000 yuan/mt in the week to Friday August 9. Prices of cobalt hydroxide also rose $0.2/lb on the week to $7.7-8/lb. 

Hopes for lower output at Glencore also prompted producers of cobalt salts to hike offers, with quotes in Zhejiang rising to 42,000 yuan/mt. Some producers withheld selling below 40,000 yuan/mt. However, limited procurement from power battery market and slow recovery of demand from the digital market capped the increases in cobalt salt prices. 

Prices of cobalt sulphate came in at 38,000-40,000 yuan/mt in the week to Friday August 9, up 2,000 yuan/mt on the week, with prices of cobalt chloride standing at 44,000-47,000 yuan/mt, up 2,500 yuan/mt. Prices of nickel sulphate grew an average 1,000 yuan/mt on the week to 25,000 – 28,500 yuan/mt. 

Stabilised downstream consumption slightly raised prices of cobalt (II, III) oxide, to 148,000-150,000 yuan/mt as of Friday August 9, up 2,500 yuan/mt from a week ago. 

Prices of ternary precursor nudged up on improved demand from the digital market, but orders from the power battery sector barely picked up. 

In the week to Friday August 9, prices of NCM523 rose 2,000 yuan/mt on the week, to 74,000-77,000 yuan/mt, with prices of NCM622 climbing 2,500 yuan/mt, standing at 82,000-84,000 yuan/mt.

Pressure from feedstock costs started to weigh on producers of battery-grade lithium carbonate after prices of the lithium salt trended downwards. This kept major producers at high operating rates despite limited improvement in downstream demand. Consumers usually stockpiled once a week. 

Lower prices of battery-grade lithium carbonate negatively affected prices of industrial-grade material. Intensified competition in the market is likely to extend declines in prices of industrial-grade lithium carbonate in the short term. 

SMM assessed prices of battery-grade lithium carbonate at 64,000-67,000 yuan/mt, down an average 500 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 57,000-61,000 yuan/mt, down an average 1,500 yuan/mt.

Last week, prices of battery-grade lithium hydroxide also trended downsides on domestic slower-than-expected development of high-nickel ternary battery capacity. Overseas demand for lithium hydroxide remained steady. This, together with lower inventories compared with that of lithium carbonate since July, capped the decline in prices of lithium hydroxide. 

As of Friday August 9, prices of battery-grade lithium hydroxide (coarse particle) shrank an average 1,000 yuan/mt on the week, to stand at 73,000-77,000 yuan/mt, SMM assessed.

Demand for lithium cobalt oxide (LCO) increased last week, but lower prices of lithium kept prices of LCO used to produce 4.35V batteries flat on the week at 185,000-195,000 yuan/mt. 

Higher raw materials prices and a pick-up in demand for NCM523 and NCM811 drove producers of ternary materials to raise offers last week. 

SMM assessed that prices of both NCM523 and NCM 622 materials grew 1,000 yuan/mt on the week to 127,000-135,000 yuan/mt and 144,000-151,000 yuan/mt, respectively. 

Despite signs of LFP battery capacity resumption at major power battery mills, prices of LFP held steady from the previous week as it requires time for downstream demand to move to the raw materials end. 

In the week to Friday August 9, prices of LFP used in power batteries stood at 46,000-49,000 yuan/mt, SMM assessed.

Prices for lithium manganese oxide (LMO) received support from a rally in downstream demand, while prices of lithium carbonate used to produce LMO decreased. 

SMM assessed prices of LMO, used in high-energy-density lithium-ion batteries remained unchanged on the week and stood at 29,000-35,000 yuan/mt, and prices of LMO used in motive batteries also held flat on the week at 45,000-47,000 yuan/mt.