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Cobalt prices continue rally with lithium prices under pressure
Sep 16,2019 13:58CST
price review forecast
Demand for LFP batteries remained strong, while consumption of ternary batteries failed to recover

SHANGHAI, Sep 16 (SMM) – Robust demand from the digital products market continued to support a price rally in cobalt-related products last week. Cobalt chloride and cobalt (II, III) oxide traded in premiums against prices of cobalt sulphate and ternary materials. Lower inventories buoyed both futures and spot prices of cobalt raw materials and drove up costs. 

Prices of lithium products, however, remained under pressure last week. Some smelters mulled switching capacity if prices of lithium carbonate continue to fall. SMM expects the price spread between lithium carbonate and lithium hydroxide to narrow further in the weeks ahead. 

Subsidy cuts effective in late-June accelerated declines in China’s sales and production of new energy vehicles (NEVs) in August. According to data from the China Association of Automobile Manufacturers (CAAM), sales of new energy vehicles (NEVs) in China contracted for a second straight month in August, falling 15.8% from a year ago to 85,000 units. NEV sales posted its first year-over-year decline of 4.7% in July.

CAAM data also showed that NEVs production declined 12.1% on the year to stand at 87,000 units in August, after it lost 6.9% on a yearly basis in July. 

Production and sales of pure-electric passenger vehicles, however, swung to growth last month as more commercial vehicles were put into operation. 

Data from the China Automobile Battery Industry Innovation Alliance showed that domestic production of power batteries stood at 6.7GWh in August, down 0.4% from a year ago but up 16.6% from a month earlier. Among this, production of ternary batteries grew 20.8% on the year and 7.3% on the month, standing at 4.6GWh and accounting for 68.5% of the total. Output of lithium iron phosphate (LFP) batteries dipped 26.9% year on year but jumped 47.6% month on month to 2.1GWh, taking up 31.1% of the total output. 

The share of LFP batteries among the total output of power batteries expanded in August due to their better safety performance and cost advantages. Higher prices of cobalt and nickel raw materials hiked costs of ternary batteries and therefore squeezed their proportion in overall production. 

Elevated costs and cash flow issues have driven some major battery producers to shift capacity to LFP batteries, which saw greater consumption. Operating rates across ternary battery mills remained low without signs of a significant increase. 

Last week, domestic producers of refined cobalt continued to raise offers but downstream consumers procured cautiously on concerns about higher overseas prices further lifting domestic quotes. Cheap products were barely seen in the market. Producers of cobalt hydroxide also firmed up offers last week, and higher spot prices at ports limited any import arbitrage window. 

SMM assessed traded prices of refined cobalt climbed 11,000 yuan/mt from a week ago, to stand at 273,000-283,000 yuan/mt in the week of September 13. Prices of cobalt hydroxide rose $0.55/lb on the week to $10.2-11.2/lb.

More downstream enquiries buoyed prices of cobalt sulphate, but only at a slow pace. Cobalt chloride traded in premiums against prices of cobalt sulphate amid relatively stronger demand.

SMM assessed prices of cobalt sulphate at 53,000-57,000 yuan/mt in the week of September 13, up 3,000 yuan/mt on the week, with prices of cobalt chloride standing at 65,000-70,000 yuan/mt, up 2,000 yuan/mt.

Prices of battery-grade nickel sulphate rose on average of 750 yuan/mt on the week to 30,000-32,500 yuan/mt, as downstream ternary battery producers limitedly accepted higher offers. 

Prices of cobalt (II, III) oxide, used to produce lithium cobalt oxide (LCO) for batteries, trended upwards despite small amounts of downstream procurement. SMM assessed that trades of cobalt (II, III) oxide occurred at 198,000-208,000 yuan/mt as of September 13, up 5,000 yuan/mt from a week ago.

Prices of ternary precursor continued to move higher with prices of raw materials cobalt and nickel. But sluggish demand from the ternary battery market restrained higher feedstock prices from spreading to the downstream. 

Prices of NCM523 climbed 2,000 yuan/mt on the week to 94,000-99,000 yuan/mt, with NCM622 increasing 2,000 yuan/mt to 101,000-105,000 yuan/mt.

With an absence of a significant pickup in downstream demand from ternary batteries, prices of lithium carbonate edged lower last week, underpinned by smaller inventories across producers. 

Declines in lithium carbonate prices during the past three months erased margins and even caused losses at producers. This may push some battery-grade lithium carbonate producers to transfer capacity to lithium hydroxide or other lithium compounds in the near future, SMM learned. 

SMM assessed prices of battery-grade lithium carbonate flat last week at 60,000-63,500 yuan/mt, while prices of industrial-grade lithium carbonate at 51,500-53,500 yuan/mt, down 500 yuan/mt on the week. We expect prices of industrial-grade lithium carbonate to stem declines in the short term, supported by growing demand from LFP batteries. 

Prices of battery-grade lithium hydroxide (coarse particle) shrank an average 1,000 yuan/mt on the week to 68,000-71,000 yuan/mt, SMM assessed. Without additions of demand and given stable supply, prices of lithium hydroxide may further narrow their spread with lithium carbonate prices in the remainder of this year. 

Prices of LCO, which is used to produce 4.35V batteries, rose an average 5,000 yuan/mt on the week to 207,000-217,000 yuan/mt, supported by steady consumption. 

Higher quotes failed to continue to drive up traded prices of ternary materials last week as weak consumption by end-users kept downstream producers on the sidelines. SMM assessed that prices of both NCM523 and NCM 622 materials remained unchanged on the week at 138,000-146,000 yuan/mt and 155,000-162,000 yuan/mt, respectively.

Prices of LFP material stood flat at 46,000-49,000 yuan/mt last week as lower prices of lithium carbonate, raw material to produce LFP, depressed upward momentum in LFP prices, despite demand recovery for LFP batteries from carmakers.

Prices for lithium manganese oxide (LMO) also held flat last week, standing at 29,000-34,000 yuan/mt for LMO used in high-energy-density lithium-ion batteries and at 44,000-46,000 yuan/mt for LMO used in motive batteries. 

A traditional high season for consumer batteries is expected to bolster demand for LMO this month, but intensified competition in the market and falling prices of raw materials may prevent a rebound in LMO prices. 


Market commentary

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