[SMM Analysis] Consumer Demand Transmission Hindered, Cobalt Price Rebound Still Under Heavy Pressure

The overall market remained sluggish this week. Although the July consumption peak season has arrived and battery cell production schedules saw WoW growth, high inventories in the cathode and upstream sectors absorbed the incremental demand, preventing it from transmitting upstream along the industry chain. Hence, shipment pressure on cobalt salt plants and cathode material plants remained unabated.

From the market sentiment perspective, the influence of supply-side disruptions has weakened noticeably. Mid-week, the DRC announced the cancellation of unused Q2 quotas, which triggered only brief fluctuations that morning before quickly subsiding, indicating that market focus has shifted from the policy front to the pace of own demand and inventory digestion. While the quota cancellation brought some changes to H2 fundamentals, it merely shifted the supply-demand pattern from very loose to relatively loose and did not fundamentally reverse market fundamentals.

On the price front, the trends for cobalt chloride, Co3O4, and LCO were largely consistent, all in a consolidation phase. For cobalt chloride, smelter quotations began to stabilize, with some firms raising slightly to test the market. However, under inventory pressure and the “rush to buy amid continuous price rise and hold back amid price downturn” sentiment, downstream procurement remained cautious, actual transactions were limited, and downside room in the short term was small, keeping prices largely stable. Co3O4 moved sideways following cobalt salt; after the interim reporting window, previous selling pressure was largely released, and quotations tended to stabilize, but downstream cathode plants continued to push for lower prices, and transactions remained scarce. For LCO, in addition to being dragged down by weak upstream Co3O4 prices, lithium carbonate prices recently rose significantly, but downstream enterprises’ inventories buffered the impact of raw material fluctuations on quotations, leaving overall prices relatively stable.

Overall, the core issue facing the industry chain currently is that previously accumulated inventories have not yet been fully digested. Even though end-user battery cell demand has improved marginally, it will still take time for this to transmit upstream. In the short term, price rebound will be under considerable pressure, fundamentally because market inventories are excessively high, severely suppressing procurement demand for upstream products.