[SMM Cobalt & Lithium Morning Meeting Summary] Limited support from consumer demand, sentiment in the ternary cathode material market remains weak

Lithium Ore:

At the beginning of the week, lithium ore prices continued to drop WoW. For spodumene, on the supply side, although overseas mines showed some willingness to hold prices, they lowered their quotations due to shipment pressure, with SC6 CIF prices falling below $700/mt. On the demand side, as lithium chemical prices remain low, downstream buyers' psychological price levels have been continuously decreasing, and their willingness to purchase lithium ore at CIF prices above $660/mt is weak. Overall, with the decline in both futures and spot prices of lithium carbonate, demand continues to drive prices down, resulting in mediocre transaction performance. Additionally, considering the trend of lithium carbonate and recent cost reductions in overseas lithium mines, there is an expectation of further weakness in lithium ore prices.

Lithium Carbonate:

At the beginning of the week, lithium carbonate prices continued to decline. As lithium ore prices keep falling, the cost support for lithium carbonate continues to weaken. With no production cuts or shutdowns at mines, the supply of lithium carbonate remains strong. Given the relatively limited increase in downstream demand, the surplus situation of lithium carbonate is hard to reverse, and prices continue to fluctuate at lows.

Lithium Hydroxide:

At the beginning of the week, lithium hydroxide prices continued to drop. Most demand from buyers is met through long-term contracts and customer-supplied materials, with little spot demand. On the supply side, most producers maintain relatively stable production based on their schedules, with generally high inventories. Faced with downstream pressure to lower prices, their stance on holding prices has softened, leading to a decline in transaction prices. Currently, there is no clear expectation of a demand increase; on the supply side, cost support has weakened due to recent declines in ore prices, and coupled with the downward pull from falling lithium carbonate prices, lithium hydroxide prices are more likely to fall than rise.

Refined Cobalt:

This week, spot prices of refined cobalt saw a slight rebound. On the supply side, producers' spot shipments continue to decrease, and the market is still digesting social inventory. On the demand side, downstream producers have become more active in inquiries recently, with some alloy producers cautiously starting small-scale purchases. Given that the DRC's subsequent policies on the sales ban have not been announced, short-term supply and demand conditions are unlikely to change, and refined cobalt prices may fluctuate.

Intermediate Products:

This week, spot prices of cobalt intermediate products remained stable. On the supply side, the market is still dominated by traders' goods, with high quotations maintained. On the demand side, as the DRC's subsequent policies remain unknown, downstream producers are mainly in a wait-and-see mode, with recent inquiries and purchases being weak, resulting in mediocre spot transactions of cobalt intermediate products. It is expected that cobalt intermediate products will remain stable in the near term.

Cobalt Salts (Cobalt Sulphate and Cobalt Chloride):

This week, spot prices of cobalt sulphate remained stable. On the supply side, smelters' spot quotations for cobalt sulphate have flattened, with major producers showing little willingness to sell at low prices, and recyclers maintaining low quotations. On the demand side, orders from some precursor plants have slightly declined, and purchasing actions have become more cautious. Overall, downstream sentiment remains dominated by a wait-and-see approach, and spot transactions of cobalt sulphate have been very sluggish. It is expected that cobalt sulphate spot prices may decline this week.

At the beginning of the week, cobalt chloride prices remained temporarily stable. From a supply perspective, due to unresolved issues in the transportation cycle of overseas cobalt raw materials, smelters remain cautious in their quotations, with a strong reluctance to sell. From a demand perspective, the purchasing pace of downstream Co3O4 enterprises has slowed, with few market inquiries, and spot transactions are mainly small-scale and demand-driven. It is expected that downstream enterprises' restocking demand will slightly rebound in Q3, and cobalt chloride spot prices will remain high with fluctuations.

Cobalt Salts (Co3O4):

At the beginning of the week, Co3O4 prices remained temporarily stable. Although the export ban in the DRC has kept raw material costs high, excessive domestic inventory has also suppressed the momentum for price increases, and spot quotations remain weak. Downstream demand has not shown significant improvement, and most LCO enterprises still mainly purchase as needed. The market inquiry atmosphere is sluggish, and the overall market is in a wait-and-see stage. The industry is generally waiting for further news to stimulate the market, and it is expected that Co3O4 spot prices still have some downside room this week.

Nickel Sulphate:

On May 19, the SMM battery-grade nickel sulphate index price was 27,757 yuan/mt, with the quotation range for battery-grade nickel sulphate at 27,760-28,230 yuan/mt, and the average price remained stable compared to the previous day. From the cost side, MHP production in Indonesia was significantly affected by floods in April, creating a supply-demand gap and keeping its coefficient firm at high levels. Overall, MHP cost support remains strong. From the demand side, due to destocking by downstream material plants this month, some precursor production schedules have declined, weakening the demand for nickel salts. From the supply side, some nickel salt smelters have lowered their quotation coefficients this week due to weak precursor demand. Looking ahead, it is expected that nickel salt prices will remain stable this week based on weak market supply and demand and strong cost support.

Ternary Cathode Precursor:

On Monday, prices of 5-series, 6-series, and 8-series products in the ternary cathode precursor market remained stable. In terms of raw material costs, nickel sulphate and cobalt sulphate prices remained temporarily stable, while manganese sulphate prices dropped slightly, but the impact on precursor prices was limited. From the demand side, the overall performance of the large power precursor market is mediocre, although there has been some order transfer among manufacturers, the overall demand has not shown significant growth and is still mainly supported by existing projects. Orders for small power and consumer precursors have increased recently, mainly due to rising cobalt prices, with some downstream material plants choosing to stockpile in advance, but the actual demand increase is limited. On the supply side, affected by market fluctuations this year, power precursor producers generally no longer sign long-term orders (such as half a year or a year), but instead adopt monthly negotiated discounts. Some enterprises have raised the discount coefficients for long-term contracts, but downstream customers have low acceptance of the adjusted prices. Consumer precursors are still mainly sold on a spot basis, and the discount coefficients have remained basically stable since April. Currently, precursor enterprises and downstream material plants are still in a price negotiation stage. Looking ahead this week, nickel sulphate prices may rise slightly, and ternary precursor prices are expected to remain firm.

Ternary Cathode Material:

On Monday, ternary cathode material prices continued to decline. In terms of raw materials, nickel sulphate and cobalt sulphate prices remained stable, manganese sulphate prices dropped slightly, while lithium carbonate and lithium hydroxide prices fell significantly. From the demand side, the large power market performance is mediocre, although sales of some automakers are good, providing some support for ternary materials, the increase is limited; the consumer and small power markets have seen more orders recently, especially with good overseas demand, but due to the limited size of the consumer market, the overall increase is not significant. On the supply side, current market supply mainly relies on previously signed long-term contracts, and some enterprises have raised relevant discount coefficients, adopting a settlement method that separately negotiates discounts for raw materials such as nickel sulphate, cobalt sulphate, and lithium carbonate. Recent market sentiment is weak, with mainly demand-driven stockpiling, but the month-end stockpiling peak is approaching next week, and it is expected that market activity will increase. In terms of price trends, it is expected that nickel sulphate prices will remain firm, but lithium chemicals still have downside room, and ternary material prices may further decline due to raw material price fluctuations.

LFP:

This week, the downward trend of LFP prices slowed, with an overall drop of about 75 yuan/mt, mainly due to signs of a rebound in lithium carbonate prices in the past two days, but the weekly drop was about 450 yuan/mt. On the market side, material plants were more active in production this week, with output from top-tier material plants starting to recover. Downstream battery cell manufacturers' demand rebounded compared to the beginning of the month, mainly due to the US tariff reduction on China, prompting battery cell manufacturers to rush for installation and export to ship to the US before the tariff increase, and to accelerate production to avoid political instability. In terms of price settlement, the average price of iron phosphate showed a slight upward trend in April, and some LFP plants expected a Q2 processing fee increase, but no substantive results were achieved after negotiations with downstream battery cell manufacturers. However, currently, iron phosphate raw material prices have started to decline, so there is an expectation of a price reduction in May; additionally, some battery cell manufacturers will restart tenders in June, making a price increase before that unlikely. Considering these two points, SMM expects that Q2 processing fees will be difficult to increase.

Iron Phosphate:

This week, iron phosphate prices remained stable. On the raw material side, industrial-grade MAP prices rose slightly and then stabilized. In May, the iron phosphate market competition remained fierce, and it was difficult for enterprises to hold prices. Some iron phosphate enterprises faced order limitations, and some planned to cut production in May to cope with the current difficulties and stabilize the supply-demand relationship.

LCO:

This week, the mainstream quotations for 4.2V/4.4V/4.5V LCO were 219,000 yuan/mt, 224,000 yuan/mt, and 234,000 yuan/mt, respectively. On the raw material side, battery-grade lithium carbonate continued its previous downward trend this week, and Co3O4 prices dropped slightly. Affected by raw material prices, LCO prices dropped slightly this week. On the supply side, since April, top-tier enterprises have fully released their capacity, with stable and high production levels; on the demand side, terminal manufacturers are preparing for 618, driving an increase in purchase orders from battery cell manufacturers. Additionally, due to the uncertainty of cobalt policies in the DRC, LCO cathode plants are cautious in their shipments.

Anode:

This week, prices of some artificial graphite dropped slightly. On the cost side, graphitisation tolling service prices remained relatively stable under the pull of supply and demand and costs; raw material coke prices continued to decline due to weak downstream demand. On the supply and demand side, demand lacks growth momentum due to tariff impacts, and anode production increased as coke prices fell, but the price drop did not cover the previous increase, leading to production based on sales. Looking ahead, on the cost side, raw material prices may adopt a price-holding strategy. On the demand side, during the 90-day tariff waiting period, downstream demand may increase. Therefore, it is expected that anode material prices may rise due to increased demand and cost support, but overcapacity may limit the price increase.
This week, the price of natural graphite experienced a slight decline. On the cost side, there were no significant changes in the prices of core raw materials and processing costs this week. The supply side remained relatively abundant, while downstream demand was sluggish with no signs of improvement. Therefore, although there was no significant fluctuation in production costs during this period, due to production lag, the previous decline in raw material prices led to a slight drop in the price of natural graphite anode material this week. Looking ahead, demand may increase due to tariff impacts. However, as the specification gap between artificial graphite and natural graphite anodes narrows, and with a significant price difference still existing, the growth in demand for natural graphite will be relatively limited, resulting in continued ample supply. It is expected that the price of natural graphite anode material will continue to face downward pressure.

Separator:

This week, the prices of lithium battery separator materials remained stable. The mainstream quotations for wet-process separators of 5um/7um/9um were 1.59 yuan, 0.82 yuan, and 0.75 yuan, respectively. The mainstream quotations for dry-process separators of 12um/16um were 0.46 yuan and 0.43 yuan, respectively. Separator companies have maintained a strong sentiment for price increases since the post-holiday period. Currently, negotiations for Q2 orders are underway, and price trends are expected to undergo notable changes in the near future. On the supply side, after the expansion of wet-process separator companies, separator supply exceeds demand, with relatively high capacity utilization rates across the board. In the dry-process separator market, due to oversupply, companies have voluntarily restricted production capacity, resulting in a relatively balanced supply and demand situation. On the demand side, increased downstream end-use demand has driven an increase in purchasing orders from battery cell manufacturers.

Electrolyte

: This week, the price of electrolytes remained stable. On the cost side, the prices of core raw materials, including LiPF6 and solvents, remained stable, while the price of additives decreased slightly, resulting in a minor reduction in the overall manufacturing cost of electrolytes. On the demand side, the downstream new energy battery market has shown some signs of recovery. However, downstream customers continue to adopt a cautious approach to production and stockpiling, adhering to the principle of purchasing as needed. This has led to insufficient overall market demand momentum, making it difficult to form a significant boosting effect on the industry chain. On the supply side, major companies in the industry continue to deepen the "produce based on sales" operational model, flexibly adjusting production capacity according to actual market demand. However, with electrolyte prices remaining low for an extended period, some companies, out of cost control and loss mitigation considerations, have proactively avoided orders with excessively low prices and significant losses, resulting in a low overall operating rate in the industry. Based on a comprehensive assessment, considering that substantial improvements in the supply-demand relationship are unlikely in the short term and the industry lacks strong stimulating factors, it is expected that electrolyte prices will continue to fluctuate within a narrow range in the coming period.

Sodium-ion Battery:

Traditional cathode companies are gradually entering the sodium-ion battery sector, with sodium-ion battery products being launched successively. As upstream and downstream supporting projects for the sodium-ion battery industry chain accelerate their layout, production lines for key components such as anode and cathode materials and battery cells will be successively completed and achieve mass production. The production cost of sodium-ion batteries will continue to decline. Meanwhile, sodium-ion batteries, with their inherent advantages of high safety and excellent C-rate performance, will further enhance their competitiveness in niche markets such as energy storage and low-speed vehicles.

Recycling:

Supply Side: This week, lithium chemical products experienced a slight decline, while nickel salts and cobalt salts remained basically flat. The coefficients for ternary and LCO black mass also continued to decline this week. Taking ternary black mass as an example: the current coefficient for ternary pole piece black mass is 74-77%, and for ternary battery black mass, it is 71.5-73%. The lithium point for LFP pole piece black mass is 2500-2600 yuan/mtu, and for LFP battery black mass, it is 2150-2300 yuan/mtu. On the supply side, the psychological selling prices of grinding mills and traders have loosened due to the continuous decline in salt prices. However, some grinding mills still choose to hold back from selling due to their current profits being below the surplus line, waiting for market conditions to improve. Market transactions were even sluggisher in April on a MoM basis. On the demand side, most wet-process plants only made just-in-time procurements of black mass amid the continuous decline in nickel, cobalt, and lithium salt prices. Additionally, due to the market's pessimistic outlook on future lithium salt prices, they only stockpiled about 1.5 months' worth of safe raw material inventory. On the cost side, except for leading integrated wet-process plants, the profits of most wet-process plants remain below the surplus line. While the profits of grinding mills are slightly better than those of wet-process plants, the profits of some small and medium-sized grinding mills continue to be inverted.

Downstream and End-users:

This week, the price fluctuations of DC-side battery cabins were minimal. The average price of 5MWh DC-side battery cabins was 0.43 yuan/Wh, while the average price of 3.44/3.77MWh DC-side battery cabins was 0.438 yuan/Wh. As the deadline for the full marketization of on-grid tariffs for incremental projects under Document No. 136 approaches, the detailed rules for energy storage participation in the power market mechanisms have not yet been fully issued in all provinces. Owners are mostly adopting a wait-and-see attitude, maintaining a stable supply-demand pattern in the energy storage market and resulting in minimal price fluctuations for DC-side battery cabins. On May 12, China and the US issued the "China-US Geneva Joint Statement on Economic and Trade Talks," reducing the tariff on China's energy storage products to 40.9%. The division of tariff burden between US owners and Chinese energy storage integrators still requires time for negotiation. SMM expects that the price of DC-side battery cabins may continue to fluctuate slightly in the short term.

On May 13, the winning bid result for the design and construction general contracting (EPC) of the Suqian Xinchu 200MW/400MWh Energy Storage Power Station Project by Suqian Xinchu Technology Co., Ltd. was announced. The project is located in Suqian City, Jiangsu Province, with a project scale of 200MW/400MWh. The winning bid price was 1.2 yuan/Wh.

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