SHANGHAI, Mar 10 (SMM) – Raw materials cost advantages and cash-in inclination drove some of the cobalt salt producers in China to reduce offers and destock last week, as more investors were on the sidelines given the fulfilment of pre-holiday orders and slow increase in new orders.
Sluggish demand in the downstream power battery market saw lithium salts consumers cautious about restocking, and demand from the industry sectors remained subdued. SMM expects limited upside momentum in near-term prices of lithium carbonate as lithium salts supply normalises in March and a smaller price spread between industrial- and battery- grade lithium carbonate squeezed the profit margins at refining plants.
The spread of the coronavirus outside China may take a toll on the demand for Chinese battery materials and lithium salts. According to some of the cathode materials producers in China, downstream companies in Japan and South Korea are currently maintaining normal operations, but some of the producers have scaled back their purchases in long-term contracts and delayed the delivery-taking. China’s exports of cathode materials and lithium salts are likely to be affected in the second quarter if the COVID-19 cannot be contained.
More downstream automakers resumed their capacity last week, but the epidemic has dampened the purchase intention of consumers, which may significantly lower production and sales of new energy vehicles in the first quarter. The NEV market currently focuses on clearing inventories, with smaller purchases of upstream batteries.
Major producers of power batteries were also in a recovery mode, but most producers (except for big producers) fulfil small amounts of orders by using pre-holiday stockpiles given weak demand in the power battery market.
A number of provinces and cities have announced incentives policies for NEVs as China encourages the development of the emerging market. For instance, Guangzhou will grant greater subsidies for new energy buses to promote the use of NEVs, and this is expected to lift production of new energy buses. More stimulus measures for the purchase of new energy passenger vehicles will likely be rolled out in the near future.
SMM expects an upsurge in consumption of digital devices after the market recovers from COVID-19, and the consumer goods market has stepped up purchases of digital batteries for April to prepare for production in Q2 2020.
In the week ended March 6, prices of refined cobalt fell 1,500 yuan/mt from the previous week to 272,000-280,000 yuan/mt, while prices of cobalt hydroxide increased $0.2/lb on the week to $9.8-10.6/lb, SMM assessed.
The price spread between Chinese and overseas cobalt products remained expanded as bearish outlook in the domestic market drove major suppliers to lower offers. Prices of imported raw materials for cobalt hydroxide stayed at high levels, while smelters showed limited purchase intention given sufficient stocks of intermediate products and slow trades.
SMM assessed the average prices of cobalt sulphate at 54,000-58,000 yuan/mt last week and prices of cobalt chloride at 65,000-69,000 yuan/mt, both down 1,500 yuan/mt from a week ago. Prices of battery-grade nickel sulphate lost 600 yuan/mt on the week to 23,800-24,500 yuan/mt.
Producers of cobalt salts resumed production steadily, but downstream demand remained sluggish with consumers cautious about restocking. Some cobalt salts plants cut offers on the back of raw materials cost advantage and cash-in demand, with transaction volumes below 100 mt last week. Downstream demand is expected to recover this week, but oversupply may continue to keep prices under pressure.
According to SMM assessments, prices of cobalt (II, III) oxide barely changed on the week at 205,000-215,000 yuan/mt, amid some purchases from downstream buyers.
Producers of consumer batteries made inquiries for purchases in April and some deals could be made this week.
SMM assessed prices of ternary precursor NCM523 at 84,000-88,000 yuan/mt for the week ended March 6, down 1,500 yuan/mt from the prior week, with prices of NCM622 stabilising at 88,000-92,000 yuan/mt.
Reduced prices of cobalt salts accounted for the declines in ternary precursor prices. Raw materials supply has normalised but downstream producers purchased only in small amounts with sufficient inventories. SMM expects further downsides in ternary precursor prices as downstream demand has not showed signs of recovery.
SMM assessed prices of battery-grade lithium carbonate flat on the week, at 47,500-50,500 yuan/mt, with prices of industrial-grade materials rising 1,000 yuan/mt on the week to 38,000-42,000 yuan/mt.
Low operating rates in Jiangxi and bullish prospects for demand recovery from the lithium manganese oxide (LMO) market lifted prices of industrial-grade lithium carbonate. Major producers in Qinghai also raised prices and some mills held cargoes back from the market. Slower increase in operating rates of power battery producers depressed the upward momentum in battery-grade lithium carbonate.
SMM assessed prices of battery-grade lithium hydroxide (coarse particle) increased 1,000 yuan/mt on the week to 53,000-59,000 yuan/mt.
Supply of micro-powder lithium hydroxide was tight, while trades remained sluggish for coarse-particle lithium hydroxide. Uncertainties around the impact of coronavirus in Japan and South Korea on exports from China weighed on market sentiment and capped the increase in lithium hydroxide prices.
Prices of LCO, which is used to produce 4.35V batteries, remained unchanged on the week at 205,000-225,000 yuan/mt.
LCO producers kept their operating rates at 50%, amid limited rise in new orders. Inquiries from downstream battery mills improved and a pickup in trades is expected this week.
Prices of ternary material NCM523 lost 1,000 yuan/mt last week, to stand at 126,000-138,000 yuan/mt, with prices of NCM622 flat at 145,000-153,000 yuan/mt, SMM assessed.
SMM assessments showed that prices of LFP used in power batteries flat on the week at 39,000-42,500 yuan/mt.
The slight increase in industrial-grade lithium carbonate barely affected prices of LFP. Downstream demand from the energy storage market outperformed that from the power battery market, and supported orders at major LFP producers. Orders at medium-scale and small mills are expected to rally in late-March.
Prices of LMO used in high-energy-density lithium-ion batteries and prices of LMO used in power batteries remained unchanged on the week, at 22,000-31,000 yuan/mt and 34,500-36,500 yuan/mt, respectively.
Some LMO producers planned to raise prices if prices of lithium carbonate extended their increase this week. LMO transactions improved last week as LMO producers received downstream orders for March and April with the rapid recovery of the digital market.
