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Cobalt prices stabilised on hesitated consumers, lithium prices see further downside room
Oct 21,2019 16:41CST
SMM Comments
Overseas producers of cheap lithium carbonate that is generated from salt-lake brines actively seek sales opportunities in China

SHANGHAI, Oct 21 (SMM) – SMM retains its outlook that cobalt prices will stay rangebound in the short term. Signs of weakness emerged in cobalt sulphate prices, but cobalt chloride prices remained robust. SMM expects the difference in their trends unlikely to sustain in the long run given a continued buyers’ market for cobalt, even as the supply glut narrowed.  

Domestic lithium prices may struggle to rebound within the year as overseas producers of cheap lithium carbonate that is generated from salt-lake brines actively seek sales opportunities in China. 

Data from the China Automobile Battery Industry Innovation Alliance showed that domestic production of power batteries stood at 7.6GWh in September, up 9.7% from a year ago and 14.7% from a month earlier. Among this, production of ternary batteries grew 15.1% on the year and 3.4% on the month, standing at 4.7GWh and accounting for 61.7% of the total. Output of lithium iron phosphate (LFP) batteries rose 2.5% year on year and jumped 38.3% month on month to 2.9GWh, taking up 37.5% of the total output, greater than a proportion of 31.1% in August

According to the data, domestic power battery production amounted to 63.5GWh in the first nine months of the year, with a year-over-year rise of 37.9%. In January-September, production of ternary batteries expanded 64.7% from the same period last year to stand at 41GWh, while output of LFP batteries shrank 1% to 20.2GWh, with the decline narrowing from that in January-August. 

SMM learned that two major battery producers in China were close to full production of LFP batteries, while the operating rates for ternary batteries stood at 70% and a lower level, respectively. Second-tier producers also scaled back output of ternary batteries in October on higher costs. 

Strong performance of the LFP battery market is expected to sustain in the fourth quarter. 

Last week, domestic prices of refined cobalt held steady as major producers in the north were unwilling to let go cargoes at lower prices. Trades remained sluggish as downstream producers had prepared sufficient stockpiles and weaker overseas prices dampened market confidence. 

Few offers of spot cobalt hydroxide were seen in the market despite greater enquiries on speculative demand.  

SMM assessed traded prices of refined cobalt flat at 285,000-295,000 yuan/mt in the week of October 18, with prices of cobalt hydroxide also stabilising at $11-12/lb.

Prices of cobalt sulphate moderated as small and medium-sized producers cut offers. Solid demand from the digital industry supported prices of cobalt chloride, which stood in premium against prices of cobalt sulphate. Major producers of cobalt sulphate have not planned for capacity transfer given time cost and concentrated downstream demand. 

SMM assessed the average price of cobalt sulphate remained unchanged from a week ago at 56,000-60,000 yuan/mt, with prices of cobalt chloride flat at 71,000-76,000 yuan/mt. Prices of battery-grade nickel sulphate lost 1,300 yuan/mt on the week to 30,000 – 31,000 yuan/mt.

Continued peak demand season held prices of cobalt (II, III) oxide stable last week at 220,000-230,000 yuan/mt, according to SMM assessments.

Prices of ternary precursor also stood flat on the week with traders fulfilling previous orders in the middle of a month. Prices will be under pressure as downstream producers of ternary materials demand lower prices on the pullback in raw material nickel and cobalt costs. 

SMM assessed prices of NCM523 and NCM622 unchanged last week at 101,000-106,000 yuan/mt and 108,000-112,000 yuan/mt, respectively.

Prices of lithium carbonate edged lower and pushed domestic smelters to the verge of losses, as elevated inventories and cash flow burden forced suppliers to destock at lower prices. 

Last month, Australian lithium miner Alita Resources entered voluntary administration just months after getting its Bald Hill lithium concentrate plant in WA into production. This was followed by refinancing by another lithium concentrate producer Altura Mining due to a wider loss. 

China’s lithium carbonate imports surged since May on greater arrivals from Chile and South Korea. Breach of purchasing contracts by foreign companies likely triggered the inflow of South Korean cargoes to China, SMM speculated. There remained stockpile of Chilean imports across third-party warehouses as distributors and downstream producers of cathode materials took only part of the imports. 

Seasonality is expected to reduce China’s production of lithium salts from salt-lake brines in the fourth quarter, with some producers mulling higher offers at the end of the month. 

However, potential greater imports of lithium carbonate may weigh on the market given their cost advantages, which will expand the downside room in domestic lithium carbonate prices. 

Last week, SMM assessed prices of battery-grade lithium carbonate at 58,000-61,000 yuan/mt, and prices of industrial-grade lithium carbonate at 48,000-53,000 yuan/mt, both down some 1,000 yuan/mt on the week. 

An absence of a significant pickup in demand and thinned spot trades depressed prices of lithium hydroxide. Stable consumption kept major mills operating close to full capacity, while weaker prices prompted medium-sized and small producers to cut output. 

SMM assessments showed that prices of battery-grade lithium hydroxide (coarse particle) lost an average 2500 yuan/mt on the week to 61,000-66,000 yuan/mt.

Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, continued to increase by an average 7,000 yuan/mt week on week to 242,000-252,000 yuan/mt, buoyed by purchases by downstream battery plants.

Limited development in the ternary materials market kept prices of NCM523 and NCM622 flat on the week, at 147,000-155,000 yuan/mt and 165,000-172,000 yuan/mt, respectively. 

Despite brisk demand since the fourth quarter, prices of LFP material continued to trend downward on lower prices of lithium carbonate, which is used to produce LFP, and reduced costs after producers resumed to normal production. Bargaining power of downstream battery mills outweighed that of LFP producers. 

SMM assessments indicated that prices of LFP used in power batteries lost 1,000 yuan/mt on the week and came in at 43,000-46,000 yuan/mt.

Stable supply and demand kept prices of lithium manganese oxide (LMO) limitedly changed last week. SMM assessed prices of LMO used in high-energy-density lithium-ion batteries at 26,000-32,000 yuan/mt and prices of LMO used in motive batteries at 43,000-45,000 yuan/mt.

Market commentary

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