Cobalt, lithium smelting product trades subdued, raw materials purchase halted

SHANGHAI, Nov 26 (SMM) – Demand and supply in the domestic cobalt/lithium market remained subdued last week despite an active financial market and upbeat data from the European electric vehicle sector.

The bearish outlook for downstream demand is extended till February 2020. Potential stockpiling ahead of the Chinese New Year and the destocking progress at downstream mills will determine the near-term prices of cobalt and lithium products.

Foreign automakers have rolled out plans to accelerate their electrification efforts in the Chinese market. 

Mercedes-Benz intends to make their entire passenger car fleet carbon-neutral by 2039. As part of the “Ambition 2039” vision, the German automaker also wants hybrid and electric vehicles to comprise at least 50% of its sales by 2030. 

Another German high-end carmaker BMW plans to offer 25 "electrified" models including hybrids and full battery-electric vehicles by 2023, two years earlier than the initially indicated. 

The Sino-German auto joint venture FAW-Volkswagen will launch an additional 10 Audi new energy vehicle models in China by 2022, and plan for around 30 EVs by 2025. 

Volkswagen Group will be in a position to build 22 million electric cars by 2028, of which 11.6 million would be made in Chinese factories. EVs coming out of plants in the Europe and China will account for more than 40% of its total output by 2030. 

Demand for battery materials will also receive a boost with the advent of the 5G network era. 

An SMM survey based on annual reports of state-run carriers China Mobile, China Unicom and China Telecom indicated that at least 14.38 million base stations needed to be constructed or upgraded in the coming years, which is expected to add demand for 155GWh of backup storage battery capacity.

SMM expects lithium iron phosphate (LFP) batteries to account for the majority of the rising demand before the cascade utilisation of lithium batteries is widely applied with mature technology. 

In the week ended November 22, SMM assessed traded prices of refined cobalt at 250,000-273,000 yuan/mt, down 1,500 yuan/mt from last week, with prices of cobalt hydroxide dipping $0.4/lb to stand at $10-10.8/lb.

Lower overseas quotes and slow trades amid cautious buyers extended the decline in prices of refined cobalt. Quotes of spot cobalt hydroxide were also lower; the bearish prospects about prices kept consumers from signing long-term contract with suppliers. 

Prices of lithium carbonate also trended downsides as producers lowered offers in order to clear inventories. Downstream electric vehicle battery producers cut output by more than half, resulting in muted trades. 

SMM assessed prices of battery-grade lithium carbonate at 54,000-57,000 yuan/mt, down 2,000 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 46,000-48,000 yuan/mt, 1,000 yuan/mt lower on the week. 

Further downside risk is expected in lithium carbonate prices in the fourth quarter as smelters manage to avoid inventory buildup. Cash-in inclination after smelters that procured lithium raw materials at high prices, together with pessimism on demand, have pushed smelters to destock. The market sees weak consumption until the third quarter of 2020.  

Prices of cobalt and nickel salts trended downsides last week as small producers cut offers to boost sales while major smelters held offers steady. The psychological price level of buyers stood at 40,000 yuan/mt for cobalt sulphate and at 50,000 yuan/mt for cobalt chloride.

Existing price spread between cobalt sulphate and refined cobalt may drive smelters to reduce production after them depleting cheap raw materials and fulfilling orders on hand. 

SMM assessed the average price of cobalt sulphate lost 4,000 yuan/mt from a week ago to 44,000-47,000 yuan/mt, with prices of cobalt chloride also slipping 4,000 yuan/mt to come in at 55,000-57,000 yuan/mt. Prices of battery-grade nickel sulphate shrank 1,250 yuan/mt on the week to 26,500-27,500 yuan/mt.

According to SMM assessments, prices of cobalt (II, III) oxide extended decline to move close to buyers’ psychological price levels, falling 5,000 yuan/mt on the week to 190,000-200,000 yuan/mt. 

For the week ended November 22, SMM assessed prices of NCM523 at 87,000-92,000 yuan/mt, down 2,000 yuan/mt from a week ago, with prices of NCM622 down 2,000 yuan/mt on the week to 97,000-102,000 yuan/mt, pressed by sluggish orders and cash-in demand at producers. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) at 54,000-60,000 yuan/mt, down 1,500 yuan/mt from a week ago.

Domestic slow progress toward high-nickel batteries weighed on demand for battery-grade lithium hydroxide, dragging some offers below that of battery-grade lithium carbonate. 

But a more concentrated market granted producers of lithium hydroxide higher bargaining power, compared to producers of lithium carbonate. This, together with current lower inventories of lithium hydroxide, may unlikely to sustain discounts of the materials against lithium carbonate. 

Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, shed 5,000 yuan/mt week on week to 220,000-230,000 yuan/mt, as small and medium-sized downstream producers bet on further decline in prices and delayed procurement, while suppliers were keen to clear inventories.  

SMM assessed prices of both NCM523 and NCM622 ternary materials down 1,000 yuan/mt from a week earlier to 133,000-146,000 yuan/mt and 150,000-162,000 yuan/mt, respectively, amid falling prices of raw materials. 

More weakness in demand for NCM622 prompted some producers to switch to NCM 811 ternary materials.  

SMM assessments showed that prices of lithium iron phosphate (LFP) used in power batteries were unchanged on the week at 42,500-45,500 yuan/mt. 

Shipments from major LFP mills were steady as producers directly supply to top power battery companies; small producers of LFP actively sought business opportunities in the low-speed vehicle and energy storage sectors. 

SMM assessed prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries flat on the week at 25,000-32,000 yuan/mt. Poorer consumption, however, weighed on prices of LMO used in motive batteries, which stood at 38,000-40,000 yuan/mt, 1,000 yuan/mt lower on the week.