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Inquiries increased for cobalt products, lithium salt prices remained under pressure

iconDec 23, 2019 17:28
Suppliers and buyers remained in a deadlock as downstream producers kept from buying when sellers moved to firm up offers

SHANGHAI, Dec 23 (SMM) – Near-term prices of cobalt and lithium products will hold mostly steady while demand will remain weak. The recent positive signals from the overseas new energy market led to expectations of a demand recovery in the second half of 2020. 

Inquiries for cobalt salts and intermediate products improved last week, but suppliers and buyers remained in a deadlock as downstream producers withheld from buying when sellers moved to firm up offers. 

Power battery producers in China continued to scale back operation, weighing on orders at cathode material producers. Producers across the chain have started mulling cost reduction on expectations of further subsidy cuts for new energy vehicles in 2020. 

Instead of spreading cost pressure to upstream materials producers, some battery makers focus on innovative technologies for improving efficiency and lowering costs. 

CATL, China's largest automotive lithium-ion battery producer, in September unveiled its new cell-to-pack (CTP) power battery development platform, which is able to raise mass-energy density of a battery pack by 10-15%, improve volume utilisation rate by 15-20% and reduce the amount of parts for battery packs by 40%, improving overall production efficiency by 50%.

Other battery producers and carmakers such as BYD, Svolt Energy Technology also accelerate investment in research and development.

In the week ended December 20, prices of refined cobalt stemmed their decline and remained unchanged from a week ago at 250,000-266,000 yuan/mt, SMM assessed. Prices of cobalt hydroxide also stood flat on the week to $9.4-10.2/lb.

Some deals of refined cobalt were made at lower prices. Inquiries increased last week but transactions remained limited. Sellers of cobalt hydroxide held discounts stable as some consumers replenished stocks on prospects for higher demand next year. 

SMM assessed the average prices of both cobalt sulphate and cobalt chloride flat on the week, at 42,000-45,000 yuan/mt and 52,000-54,000 yuan/mt, respectively. Prices of battery-grade nickel sulphate, meanwhile, extended decline by 500 yuan/mt to 24,000-24,500 yuan/mt. 

While prices of cobalt salts bottomed out, suppliers and buyers remained in a deadlock as downstream producers kept from buying when sellers moved to raise offers. 

According to SMM assessments, prices of cobalt (II, III) oxide also extended slide by 2,000 yuan/mt last week to 165,000-175,000 yuan/mt.

Prices of cobalt (II, III) oxide have moved close to prices of cobalt sulphate series products, as concentrated demand weighed on the bargaining power of producers. 

For the week ended December 20, SMM assessed prices of ternary precursor NCM523 and NCM622 both lost 1,000 yuan/mt on the week, to 76,000-79,000 yuan/mt and 86,000-89,000 yuan/mt, respectively.

Orders at ternary precursor plants continued to reduce as some downstream battery producers took holiday in advance and most plants have stored up inventories for 3-4 months. 

Prices of feedstock cobalt sulphate stabilised last week, which together with limited fluctuation in nickel prices, caused little impact on ternary precursor prices on the raw material front. 

Weakened demand for NCM622 and significant selloffs of NCM523 on the back of cash-flow burden at producers will likely extend the decline in ternary precursor prices. 

SMM assessed prices of battery-grade lithium carbonate at 49,500-52,000 yuan/mt, down 1,000 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 39,000-43,000 yuan/mt, 1,250 yuan/mt lower on the week.

Domestic lithium carbonate smelters currently hold inventories at an average level of more than a month and a half. They are likely to control stock levels by suspending or reducing production at the month-end on expectations of stagnant transaction albeit lower offers, as fourth-quarter output cut at downstream materials producers slashed demand. 

In Qinghai, the spread between the highest and lowest prices of industrial-grade lithium carbonate has narrowed. Prices of battery-grade lithium carbonate also faced downward pressure. 

Market participants told SMM that price negotiations for spodumene concentrate between Chinese smelters and Australian mines have occurred at as low as $455/mt as new miners were compelled to maintain production and sell off stocks amid cash-flow burden.

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) at 52,000-57,000 yuan/mt, flat from a week ago.

The quality capacity of battery-grade lithium hydroxide in China is close to full operation this year. Small and medium-scale producers, meanwhile, maintained operating rate at low levels with limited shipments as they found it difficult to supply foreign companies. 

Domestic producers of battery-grade lithium hydroxide may further lower quotes to clear inventories and cash in amid lingering weakness in demand. 

Nonetheless, high-end prices of lithium hydroxide may stabilise in the first quarter of 2020 as orders at large mills pick up with the start of procurement by foreign carmakers including Tesla, Volkswagen and BMW.

Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, accelerated their decline on the back of lower feedstock prices, falling 3,000 yuan/mt to stand at 195,000-210,000 yuan/mt, SMM assessed.

The decline in LCO prices, however, may slow down in the near term as prices had fallen below 200,000 yuan/mt, a crucial level for producers. 

SMM assessed prices of ternary material NCM523 and NCM622 at 126,000-136,000 yuan/mt and 145,000-153,000 yuan/mt, respectively, both down 1,000 yuan/mt on the week, the same pace as a week earlier. 

Backlogged inventories at downstream battery plants hampered trades of ternary material, and this drove some ternary material producers to shut for year-end maintenance in advance. 

Prices reduction of raw materials outweighed substantial transactions of ternary material NCM523, and weighed on prices of the product. 

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

Operating rates of LFP producers stood below 50%. Trades were sluggish except for purchases by large power battery companies. 

SMM assessed prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries flat on the week at 23,000-31,000 yuan/mt, and prices of LMO used in motive batteries limited changed at 35,000-37,000 yuan/mt.

LMO prices still face downward risk as producers are keen to cash in at year-end. 

Market commentary
Cobalt lithium weekly review

For queries, please contact Michael Jiang at michaeljiang@smm.cn

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