[2019.10.17 minutes of Internal Morning meeting of Cobalt and Lithium New Energy] the price of cobalt will show a concussive trend in October, and imported lithium carbonate will show an abnormal value.

SMM, 17 October:

Battery end Market:

According to the China Automotive Power Battery Industry Innovation Alliance, in September 2019, China's power battery production totaled 7.6 GWH, up 9.7 percent from a year earlier and 14.7 percent from the previous month. Among them, the output of ternary batteries accounted for 61.7% of the total output, up 15.1% from the same period last year, and 3.4% from the previous year, while the output of lithium iron phosphate batteries accounted for 37.5% of the total output, an increase of 2.5% over the same period last year, and an increase of 38.3% over the same period last year. From January to September, the total output of power batteries in China was 63.5GWhH, an increase of 37.9% over the same period last year. Among them, the output of ternary batteries totaled 41.0 GWH, accounting for 64.6% of the total output, an increase of 64.7% over the same period last year, while the output of lithium iron phosphate batteries totaled 20.2 GWha, accounting for 31.9% of the total output, down 1.0% from the same period last year.

News: on Oct. 14, Ningde Times announced the company's earnings forecast for the first three quarters of 2019 and the third quarter of 2019. In the first three quarters, Ningde Times expected the company's net profit to be 3.092 billion yuan to 3.568 billion yuan, an increase of 30% to 50% over the same period last year. The Ningde era illustrates the main reasons for the decline in third-quarter results in 2019 compared with the same period a year earlier. The price of some of the company's products fell, the gross profit margin decreased; in the third quarter, R & D investment increased, management expenses increased, and the proportion of expenses to revenue increased.

Upstream raw material prices:

Cobalt: foreign media quotation was cut yesterday, in line with SMM's previous forecast. SMM maintained its previous view that cobalt prices fluctuated by 15 per cent in October. At present, the cobalt sulfate market is weak, the cobalt chloride market is still strong, and the two products cannot deviate from each other for a long time. Given that cobalt fundamentals are still in excess of demand, even if the surplus is narrowed and more concentrated, it is still a strong buyer market. It is strongly suggested that the downstream settlement should adopt the SMM cobalt salt price difference linkage mechanism to avoid the procurement risk caused by the deviation of sulfate price trend.

Lithium: the import of domestic lithium carbonate has been abnormal since May 2019, with a rapid growth rate. According to SMM, lithium carbonate imports from Chile and South Korea have increased. South Korean import growth We speculate that the orders of foreign companies in South Korea have been broken and re-sold to China. On the other hand, lithium carbonate imported from Chile has not been completely removed by downstream consumption and dealers of cathode materials, and some of them still exist in third-party warehouses in the form of inventory. After entering the fourth quarter, the output of domestic salt lake enterprises may decline slightly due to the impact of the season. At the same time, some enterprises have indicated that they will raise prices by the end of the month. However, we believe that if the import volume of lithium carbonate increases further, and the cost of lithium carbonate in salt lake has a significant advantage over the domestic ore lithium carbonate, if the imported lithium carbonate takes advantage of the cost advantage and uses the low price strategy to ship, it will put further pressure on the domestic lithium carbonate price in the fourth quarter. Or there will be a new bottom range.

SMM Cobalt Lithium Research team

Hong Lu 021-51666814

Qin Jingjing 021-51666828

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