SHANGHAI, Nov 18 (SMM) – Weakness in cobalt and lithium prices continued last week, with smelters considering reduction of output to ease bearish sentiment. The market was pessimistic about downstream demand till February next year, following downbeat data from the power battery market in October.
The year-end may see a potential selloff from cobalt and lithium producers amid cash-in demand. Meanwhile, whether major companies could achieve their annual production and sales targets will be closely monitored.
Sluggish consumption has weighed prices of lithium hydroxide to discounts against prices of lithium carbonate. But SMM expects the downside room in the discounts to be capped as lithium hydroxide producers will likely face less severe pressure from raw materials inventories, compared to lithium carbonate producers. SMM also sees a limited rise in lithium downstream demand next year.
An SMM survey found that operating rates across lithium iron phosphate (LFP) battery producers fell significantly in November, following production cuts at ternary power battery mills that started in October. This is expected to lower the operating rate in the power battery industry to 30% this month.
Automakers told SMM that their focuses in 2019 shifted to the time-share rental market despite its smaller market share, as downward pressure built up in the consumer market, which accounts for the bulk of NEV consumption, and pushed up inventories.
Shrinking subsidies to NEVs drove car producers to transfer cost pressure to the upstream front. This saw the prices of ternary power battery pack down 38% from the start of the year, to 0.8-0.9 yuan/Wh as of November 15.
Going forward there will be greater costs pressure facing car producers as China further scales back national subsidies. This, together with the intensified competition with overseas automakers, will see some car companies prioritising the use of the more cost-effective LFP batteries in 2020.
Last week, prices of refined cobalt extended their decline with top producers in the north cutting offers. Lower prices, however, failed to attract downstream buying interest as consumers held stockpiles and took a bearish outlook for prices.
Transactions of cobalt hydroxide were also subdued as spot offers remained above the psychological price levels of buyers that stood below $10/lb.
SMM assessed traded prices of refined cobalt at 253,000-273,000 yuan/mt in the week of November 15, down 14,500 yuan/mt on the week, with prices of cobalt hydroxide dipping $0.4/lb to stand at $10.3-11.3/lb.
Prices of cobalt and nickel salts continued to fall last week as small producers cut offers to clear inventories. Meanwhile, major producers held offers firm at 53,000 yuan/mt for cobalt sulphate and at 63,000 yuan/mt for cobalt chloride.
SMM assessed the average price of cobalt sulphate lost 1,500 yuan/mt from a week ago to 47,000-52,000 yuan/mt, with prices of cobalt chloride slipping 4,500 yuan/mt to come in at 58,000-62,000 yuan/mt. Prices of battery-grade nickel sulphate shrank 1,500 yuan/mt on the week to 28,000-28,500 yuan/mt.
Prices of cobalt (II, III) oxide also trended downsides with key producers mulling output cuts on expectations of weaker demand after the peak consumption season in the digital sector.
According to SMM assessments, prices of cobalt (II, III) oxide dropped 11,000 yuan/mt on the week to 195,000-205,000 yuan/mt. Psychological price levels of buyers came in at below 190,000 yuan/mt.
Falling feedstock prices and weak downstream orders further weighed on prices of ternary precursors. Pessimistic prospect about demand will trigger cutbacks at major mills.
For the week ended November 15, SMM assessed prices of NCM523 at 89,000-94,000 yuan/mt, down 3,000 yuan/mt from a week ago, with prices of NCM622 down 3,500 yuan/mt on the week to 99,000-104,000 yuan/mt.
Prices of lithium carbonate again moved lower amid thinner trades as downstream power battery plants scaled back production.
Domestic supply of the material increased as greater imports of lithium carbonate produced from salt lake brine countered supply disruption of industrial-grade lithium carbonate caused by seasonality in the fourth quarter. Production line adjustment also raised the supply of battery-grade lithium carbonate.
While some lithium carbonate producers boosted production to compensate for small margins, the others struggled to maintain operation as dipping prices drove them into losses. Prices will remain under pressure as the negotiation for annual purchasing contracts commences in the fourth quarter.
Last week, SMM assessed prices of industrial-grade lithium carbonate at 47,000-49,000 yuan/mt and prices of battery-grade lithium carbonate at 56,000-59,000 yuan/mt, both down 500 yuan/mt on the week.
Prices of lithium hydroxide fell significantly last week after power battery mills announced to slash production in the fourth quarter. Major battery producers slowed down the switch to high-nickel content batteries, which depressed trades of battery-grade lithium hydroxide.
Quotes of lithium hydroxide were heard below that of battery-grade lithium carbonate, SMM learned.
SMM assessed prices of battery-grade lithium hydroxide (coarse particle) at 55,000-62,000 yuan/mt, down 4,000 yuan/mt from a week ago.
Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, shed 8,000 yuan/mt week on week to 225,000-235,000 yuan/mt, as small and medium-sized producers cleared inventories and major battery mills further lowered purchasing prices.
Weakened demand and competition with foreign materials extended slide in prices of ternary materials. Top producers continued to fulfil previous orders but weakness in consumption intensified.
SMM assessed prices of NCM523 down 4,500 yuan/mt from a week earlier to 135,000-146,000 yuan/mt and prices of NCM622 down 5,500 yuan/mt, to 152,000-162,000 yuan/mt.
Prices of LFP material remained steady last week. In a highly concentrated market, risk aversion kept companies producing according to sales.
SMM assessments indicated that prices of LFP used in power batteries were unchanged on the week at 42,500-45,500 yuan/mt.
The commencement of a slow season weighed on prices of lithium manganese oxide (LMO) as expected.
SMM assessed prices of LMO used in high-energy-density lithium-ion batteries at 25,000-32,000 yuan/mt, down 500 yuan/mt from a week ago. Poorer consumption accelerated the decline in prices of LMO used in motive batteries, which stood at 39,000-41,000 yuan/mt, 4,000 yuan/mt lower on the week.