[SMM Analysis] Cobalt Sulfate inventory Cumulative Price in China is expected to fall by 4.6-47000 yuan / ton at the end of March

SMM3, 19 March:

From the supply side of cobalt sulfate, China's cobalt sulfate production in February 2020 was about 1800 tons of metal tons, down 40.3% from the previous month and 47.6% from the same period last year. Affected by the Spring Festival holiday and the new crown epidemic, cobalt salt manufacturers started less than 40% of the total in February. Hubei, Zhejiang, Jiangxi and other places have a serious epidemic situation, which is the main area where output is declining. The price difference between electrolytic cobalt and cobalt sulfate metal began to hang upside down in late February, and the overall supply of the market continued to shrink, but the demand end was more affected by the epidemic, and the pressure of cobalt sulfate inventory continued to increase. SMM expects China's cobalt sulfate supply to increase in March 2020, to about 3900 tons of metal tons, an increase of 113.5% from the previous month and a decrease of 1% from the same period last year. The main department starts to resume gradually, most cobalt salt plants plan to resume normal operation in March, cobalt sulfate inventory pressure is still high.

Cobalt Sulfate production from February 2018 to February 2020

From the demand end of cobalt sulfate, China's total demand for cobalt sulfate in February 2020 was 1500 tons of metal tons, of which ternary precursor production corresponded to 1000 tons of cobalt sulfate demand, down 68.8% from the previous month and 62.5% from the same period last year. Affected by the epidemic in February, the operating rate of ternary precursor manufacturers is on the low side, the inventory before the year has been enough to the end of February, the demand for upstream cobalt salt has dropped sharply. In addition, the price of cobalt salt rose in February, but ternary precursor factories generally believe that there is a market price, cobalt salt supply and demand balance after the future price bearish, procurement volume has been reduced. SMM expects the purchase of cobalt sulfate by ternary precursors to increase in March with the opening of downstream demand.

Demand for cobalt sulfate in ternary precursors and cobalt tetroxide from February 2018 to February 2020

SMM expects China's cobalt sulfate balance to show an increase in inventories in February 2020, with an increase of 206 metal tons in stocks that month and 984 tons in stocks since 2018. According to SMM customers feedback in January cobalt sulfate exports were less affected by the epidemic, mainly affected by the Spring Festival holiday slightly reduced, SMM repair in January expected to export cobalt sulfate data of 300 metal tons, January cumulative cobalt sulfate about 518 metal tons. According to the General Administration of Customs, the merger of customs data in January and February 2020 will be released in March, and the SMM will be updated at the same time after the subsequent release.

Exports of Cobalt Sulfate from February 2018 to February 2020

Cumulative balance of Cobalt Sulfate from February 2018 to February 2020

At present, the domestic supply of cobalt sulfate is still greater than the demand, the price of cobalt sulfate began to fall in early March, the market transactions are sporadic, basically there is no market.

SMM Cobalt Sulfate Price from August 18, 2018 to March 18, 2020

According to the statistics of the China Automobile Association, as of March 11, the rework rate of complete vehicle enterprises was about 90%, and the rework rate of employees was about 77%. However, due to the hindrance of sales in the terminal car market in January and February, the dealer inventory pressure still exists in the short term, and the overall starting situation is not optimistic. SMM conservatively estimates that the whole car factory will gradually resume normal production in early April. Terminal demand by the new crown epidemic continued to delay, downstream power battery plant operating rate rose slowly, ternary materials and ternary precursor enterprises continue to reduce quotations, transactions are also sporadic, procurement demand is relatively low.

At present, the consumer terminal is slightly faster than the power terminal, some lithium cobalt acid manufacturers due to new orders, the purchase of cobalt trioxide, cobalt salt demand increased. The domestic cobalt sulfate industry is more scattered. Since the beginning of this month, due to the continuous decline in the price of waste recovery, the price of cobalt sulfate in the recovery plant has been reduced, and the quality requirements of consumer electronic products for cobalt sulfate are lower than those for power. Therefore, a small number of low-price procurement and recovery plants to produce cobalt sulfate.

SMM believes that the root cause of the decline in the price of cobalt sulfate is the oversupply of fundamentals and the panic caused by the new crown, starting with the low price of cobalt sulfate sold by recycling plants and pulling down the market price of cobalt sulfate as a whole. However, cobalt sulfate, the raw material of which is the intermediate of wet smelting, occupies the main body of the market, and the cost price is about 46000 yuan / ton, which is calculated as follows:

According to SMM customer feedback, at present, the discount coefficient of cobalt wet smelting intermediates has been reduced to about 0.65. Raw material imports are generally calculated according to the monthly average price of foreign media MB. In February, the average price of MB standard grade cobalt is about 17 US dollars / lb. According to the discount coefficient of 0.65, recovery rate of 97%, cobalt salt plant processing fee of about 30, 000 yuan, the cost price of cobalt sulfate is about 46000 yuan / ton. The import time and discount coefficient of wet smelting intermediates are different from each smelter in the market. The above calculation is only for reference.

As a result, by the end of March, cobalt sulfate main downstream power market demand is expected to remain low, procurement demand is expected to appear slightly next week, SMM expects the price to fall to 4.6-47000 yuan / ton at the end of March. SMM conservatively estimates that the whole car factory will gradually return to normal production in early April, and the consumer terminal will also gradually return to normal. The expected demand in April is significantly higher than that in March. SMM expects the probability of cobalt sulfate reducing the price to clear inventory in the first half of April is higher, and the price is expected to stabilize in the second half of April. Raw material imports should also be considered in the light of the falling price trend of MB. The impact of epidemic control policies such as Congo Gold and South Africa on the transportation and import of raw materials is relatively small at present. The current stock of raw materials in the cobalt salt plant is basically sufficient until late April. In extreme cases, if there is a problem in the import of raw materials in late April, the price is expected to rise in May, but in the short term, cobalt sulfate is more likely to be sold close to the cost line.

SMM cobalt lithium new energy research team

Hu Yan 021-51666809

Qin Jingjing 021-51666828

Mei Wangqin 021-51666759

Huo Yuan 021-51666898

Wuyang 021-51666818