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Cooling demand further weighed on cobalt, lithium prices 
Dec 2,2019 17:05CST
SMM sees global cobalt surplus narrowing to 8,200 mt in 2020

SHANGHAI, Dec 2 (SMM) – Prices of cobalt and lithium products remained in downtrend last week amid weakening end-user demand in a slow season, according to SMM assessments. 

Prices of feedstock cobalt sulphate have again fallen in discount against refined cobalt and cobalt (II, III) oxide, the third time this year, indicating poor demand from the power battery market. 

SMM expects prices of cobalt sulphate unlikely to recover in the upcoming three months as a traditional slack season sets in for the digital sector and downstream battery producers continue to clear inventories.

Global cobalt supply stood at 163,400 mt in 2019, according to data from SMM. Weak cobalt prices may weigh supplies to 163,300 mt in 2020. This, combined with an estimated demand of 155,100 mt, leads to a narrower surplus of 8,200 mt next year.

Going forward, with the influx of foreign auto manufacturers and battery producers, as well as greater demand for new energy vehicles in China, automakers are expected to take greater control of the upstream business in the chain to secure stable supplies of raw materials and to reduce costs. 

For instance, domestic carmakers will directly procure cobalt and lithium raw materials, build their own battery factories or trigger the additions of more power battery suppliers. 

Under such circumstances, the share of the top five or three companies in China’s power battery market will likely reduce, but the overall concentration ratio of the industry may increase as small producers are phased out. 

Last week, prices of refined cobalt continued their slide with overseas offers, losing 1,500 yuan/mt from the prior week to stand at 250,000-270,000 yuan/mt, with prices of cobalt hydroxide also down $0.4/lb to $9.6-10.4/lb.

Downstream consumers remained hesitated about procuring and awaited the price spread between domestic and overseas markets to diminish. Producers still saw margins given the current price gap between refined cobalt and cobalt salts. This may drive them to further cut offers amid sluggish demand. 

Despite active enquiries, prices of cobalt and nickel salts trended downsides last week as the psychological price level of buyers remained at lows. 

Prices of cobalt sulphate stemmed their decline and held above 40,000 yuan/mt in the second half of the week on the back of market talk about potential stockpiling by traders. 

SMM assessed the average price of cobalt sulphate fell 2,000 yuan/mt from a week ago to 42,000-45,000 yuan/mt, with prices of cobalt chloride slipping 3,500 yuan/mt to come in at 51,000-54,000 yuan/mt. Prices of battery-grade nickel sulphate shrank 500 yuan/mt on the week to 26,250-26,750 yuan/mt.

According to SMM assessments, prices of cobalt (II, III) oxide extended decline by 13,000 yuan/mt on the week to 177,000-187,000 yuan/mt amid subdued demand for spot cargoes.

For the week ended November 29, SMM assessed prices of ternary precursor NCM523 at 84,000-88,000 yuan/mt, down a sharp 3,500 yuan/mt from a week ago, with prices of NCM622 down 1,500 yuan/mt on the week to 96,000-100,000 yuan/mt.

Downstream orders were smaller for December, and this prompted producers of ternary precursor to cut prices amid intense market competition. 

SMM assessed prices of battery-grade lithium carbonate at 52,000-55,000 yuan/mt, down 2,000 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 45,000-47,000 yuan/mt, 1,000 yuan/mt lower on the week.

Battery-grade lithium carbonate companies were still pessimistic about prices. Elevated inventories and cash flow burden drove some producers to reduce offers, but some other companies held prices stable on little pressure from stockpiles. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) at 53,000-59,000 yuan/mt, down 1,000 yuan/mt from a week ago.

Lithium hydroxide producers in China grappled with lacklustre trades in the domestic spot market, with major companies mainly engaging in exports. 

Procurement from Tesla’s China factories has yet to commence, and it is estimated to kick off in the first quarter 2020. 

Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, continued to fall 7,500 yuan/mt week on week to 210,000-225,000 yuan/mt, SMM assessed. A restocking period failed to come as strong as expected in December given continued sluggish demand and earlier-than-usual Chinese New Year holiday. 

SMM assessed prices of ternary material NCM523 down 3,500 yuan/mt from a week earlier to 130,000-142,000 yuan/mt, as selloffs among both middle stream material producers and downstream battery mills intensified competition in NCM523 market. 

Prices of NCM622, meanwhile, fell at a slower pace by 1,000 yuan/mt on the week and came in at 150,000-160,000 yuan/mt. 

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, supported by possible further production cuts at power battery mills. But lower prices of lithium carbonate grew the downside risks in LFP prices. 

SMM assessed prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries down 1,000 yuan/mt week on week to 24,000-31,000 yuan/mt, with prices of LMO used in motive batteries down 2,000 yuan/mt, standing at 36,000-38,000 yuan/mt.

LMO producers surrendered profits to secure customers. They also procured cheap lithium carbonate as feedstock after lithium carbonate prices fell last week. 

Market commentary
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