[SMM Cobalt Morning Meeting Summary] Post-holiday demand recovery limited, cost support weakening, material prices under pressure

Refined cobalt:

At the start of this week, the refined cobalt market maintained a consolidating trend. After refined cobalt futures prices fell steadily, traders raised their quoted spot-futures price spreads. Currently, almost no enterprises are quoting at parity, with the minimum quoted spread at 1,000-2,000 yuan. Mainstream smelters have not adjusted prices yet, but if market prices continue to hold at current lows, the likelihood of downward price revisions remains high. Downstream demand remains sluggish, and enterprises are still making just-in-time procurement to restock. Overall, until various cobalt products stop falling and downstream restocking becomes sustained, refined cobalt prices do not yet have the conditions to break out of consolidation at lows.

Intermediate products:

At the start of this week, the cobalt intermediate products market continued its sluggish pattern of no quotes, no inquiries, and no transactions. Beneath the calm, however, the psychological price levels of buyers and sellers remain locked in a quiet standoff. On the supply side, leading overseas enterprises previously announced plans to purchase intermediate products in the market at $14.5/lb, signaling a clear intention to support prices, which remains the market's primary support factor. On the demand side, downstream purchasing willingness remains subdued. Some miners and downstream enterprises indicated that, against the backdrop of persistently falling prices for other cobalt products, they can currently only accept prices below $13/lb. At present, a significant gap remains between the support purchase price and downstream psychological price levels. The direction of the intermediate products market after the holiday will depend on actual transactions at the support purchase price.

Cobalt sulphate:

At the start of this week, cobalt sulphate prices continued to grind lower. Although mainstream producers maintained cobalt sulphate quotes near 60,000 yuan/mt this week, actual transactions were very difficult. Downstream buyers still showed no purchasing interest, with some expecting cobalt sulphate prices to fall below 50,000 yuan/mt in the future. Under the influence of bearish sentiment, only a few enterprises made just-in-time procurement. While there have been no new transactions for MHP cobalt payables and recycled cobalt payables, both are trending downward overall, steadily weakening cost support and opening new room for smelters to cut prices and sell. Until there is a substantive improvement on the demand side, the cycle of "price cuts—losses—raw material pressure—cost declines—further price cuts" is expected to continue dominating the direction of the cobalt sulphate market.

Cobalt chloride:

This week, cobalt chloride prices continued to decline, with the post-holiday grind lower persisting. In terms of transactions, only a very small number of spot orders were concluded in the market. Existing shipments were mostly concentrated within integrated enterprises for internal self-supply, used for their own Co3O4 production. Non-integrated enterprises found it essentially difficult to conclude spot orders. On the supply side, demand has yet to show improvement, and the entire industry remains in a destocking phase. Cobalt chloride production in September pulled back significantly MoM, and production cuts have become the primary means for producers to relieve inventory pressure. Enterprises that had planned to resume production before the holiday also turned to a wait-and-see stance due to persistently weak downstream demand, and the scope of production suspensions continued to expand. On the demand side, production cuts in the downstream Co3O4 segment continued to widen, further contracting raw material procurement demand. During the National Day holiday, market trading essentially stalled. After the holiday, sporadic inquiries increased but transactions remained sluggish, with limited room for price fluctuations. Industry participants generally shifted their focus to whether demand would see a substantive recovery after the holiday. Overall, cobalt chloride prices are expected to maintain a narrow decline in the short term.

Cobalt salts (Co3O4):

This week, Co3O4 prices continued to move lower. This round of declines stemmed partly from some enterprises proactively offering low prices to boost performance, and partly from the mutual reinforcement of pessimistic expectations amid the overall grinding-down sentiment. On the supply side, affected by persistently weak downstream demand, multiple enterprises remained in a state of production cuts. On the demand side, existing shipments were primarily for delivering earlier long-term contracts and undertaking processing business, with new purchases nearly absent. The market had already entered a lull before the holiday, and transactions showed no significant recovery after the holiday. The price center continued to shift slowly downward, with limited room for further adjustment in the short term. Market focus has turned to whether demand materializes after the holiday. Overall, Co3O4 prices are expected to maintain a narrow decline in the short term.

Cobalt powder and others:

At the start of this week, cobalt powder market transactions remained sluggish. Top-tier smelters lowered their quotes to around 360,000 yuan/mt, while some small and medium-sized enterprises further reduced quotes to 330,000-340,000 yuan/mt to secure deals. The crux of the current market weakness lies in earlier stockpiling behavior: during the previous period of sustained cobalt and tungsten price increases, many cemented carbide enterprises purchased large quantities of raw materials. As both raw material and finished product prices pulled back, high-cost inventories plunged these enterprises into severe losses, forcing them to slow their production pace. The consumption cycle for existing inventories was further extended, and new purchases were repeatedly postponed. For the cobalt powder market, the timing of demand recovery depends not only on the recovery of end-use orders but also on the pace at which downstream high-cost inventories are digested. Until then, the sluggish transaction environment will be difficult to fundamentally change.

Ternary cathode precursor:

At the start of the week, ternary cathode precursor prices weakened. Today, cobalt sulphate and nickel sulphate prices both declined, while manganese sulphate prices held steady.

Regarding discounts, for October and Q4 orders, some producers still intend to hold firm on payables coefficients due to the previously high cost of sulphate raw materials. For long-term contracts, some producers had already agreed on coefficients at the beginning of the year, and most producers have not yet raised coefficients. Downstream acceptance of coefficient increases for quarterly contracts also remains weak, and Q4 long-term contract coefficients are expected to remain stable to slightly weak. For spot orders, given the relatively weak performance of nickel and cobalt salt prices recently, coupled with weak downstream demand for some producers, October order coefficients are expected to decline.

On the production side, top-tier producers continued to see strong export orders this month, with production schedules at relatively high levels. However, some domestic top-tier producers saw their operating rates decline due to end-use demand falling short of expectations and tightness in key raw materials. Although this month showed slight improvement MoM, overall levels remained below the Q3 peak.

Looking ahead, sulphate prices have yet to show a clear rebound, and pricing for new orders will need to track actual downstream demand in Q4.

Ternary cathode material:

After the National Day holiday, ternary cathode material prices consolidated at lows. From the raw material side, nickel sulphate and cobalt sulphate prices continued to grind lower due to weak downstream purchasing sentiment. Lithium carbonate and lithium hydroxide prices were in a phase of consolidation at lows. In terms of transactions, given the significant decline in raw material prices with no signs of stopping, coupled with ample post-holiday inventories at battery cell manufacturers and a lack of large-scale restocking demand, the market was largely in a wait-and-see mode, with cautious transaction sentiment. On the demand side, China's EV market recovered slightly in October, but the extent was limited. The digital consumer market saw some boost from new phone launches in September, but overall demand remained weak, with no clear peak-season characteristics. Transactions are expected to see a modest recovery in the middle to latter part of this month.

LCO:

After the National Day holiday, China's LCO market remained weak overall. The traditional peak-season expectations that the market had been anticipating failed to materialize, and industry fundamentals remained under pressure. Upstream Co3O4 prices continued to decline, with cost support steadily weakening and dragging LCO product quotes lower. On the supply side, domestic cathode material enterprises generally maintained a cautious production strategy of producing based on sales, keeping industry output stable. However, weakness on the demand side was pronounced, with downstream end-user clients showing insufficient willingness to stockpile and purchases mostly limited to just-in-time procurement of small volumes. The overall pace of inventory digestion across the industry chain remained slow, and the supply-demand pattern had yet to show substantive improvement. The dual pressure from falling costs and sluggish end-use demand persisted. Overall, the weak LCO market continued after the holiday, with prices drifting lower. If end-use demand continues to show no improvement and peak-season conditions remain absent, LCO prices still have room for further decline.

News:    

[GFEX releases announcement soliciting public comments on lithium hydroxide futures and options contracts and related rules] GFEX released an announcement soliciting public comments on lithium hydroxide futures and options contracts and related rules. According to the lithium hydroxide futures and options business rules (draft for comment), the trading unit for lithium hydroxide futures contracts is 1 mt/lot. The quotation unit for lithium hydroxide futures contracts is yuan (RMB)/mt. The minimum price fluctuation for lithium hydroxide futures contracts is 20 yuan/mt. The maximum order quantity per order for lithium hydroxide futures contracts is 1,000 lots, and the minimum order quantity is 1 lot. The exchange may adjust these based on market conditions and issue separate announcements. The daily price limit for lithium hydroxide futures contracts in months before the delivery month is 5% of the previous trading day's settlement price, and the daily price limit for the delivery month is 7% of the previous trading day's settlement price.

[Goldman Sachs names CATL and Zenergy as key picks in China's battery sector] Goldman Sachs named CATL and Zenergy as key picks in China's battery sector, believing that as EV and energy storage demand continues to grow, industry share will further concentrate in enterprises with scale, technology, and cost advantages. Among them, CATL remains the sector's top pick. Goldman Sachs believes the company's power battery business has a solid profitability foundation, with more important future growth coming from energy storage and integrated energy solutions. As the business extends from pure battery cell sales to system integration and services, per-project value and profit margins are expected to improve. The bank gave CATL a 12-month target price of HK$947 for H-shares and 565 yuan for A-shares. For Zenergy, Goldman Sachs is optimistic about its continued market share gains through client expansion, capacity utilization rate improvement, and energy storage business development, and expects its future EBITDA growth to potentially rank among the top covered battery enterprises. Goldman Sachs maintained its Buy rating and HK$9 target price. (Jin10 Data APP)

[Pakistan: Middle East oil crisis accelerating EV transition] A senior Pakistani government official said that with oil prices surging and the appeal of switching to gasoline-powered vehicles declining for consumers, Pakistan is expected to achieve its EV popularization targets ahead of schedule. Under the policy announced last year, the government aims for EVs to account for 30% of new auto sales by 2030. Haroon Akhtar, advisor to Pakistan's prime minister on industry and production affairs, said that rising fuel costs since the outbreak of the Middle East conflict have shortened the time needed for consumers to recoup the higher purchase cost of EVs. He said: "I think the targets we set in last year's EV policy will be achieved earlier because rising oil prices have shortened the EV cost recovery period to one to one and a half years. People are now beginning to realize the benefit, which is not having to pay for gasoline anymore." (Jin10 Data APP)

Data source statement: Except for publicly available information, all other data are processed by SMM based on public information, market communication, and SMM's internal database models, and are for reference only and do not constitute investment advice.

SMM New Energy Research Team

Wang Cong 021-51666838

Ma Rui 021-51595780

Lin Ziya 86-2151666902

Feng Disheng 021-51666714

Lyu Yanlin 021-20707875

Zhou Zhicheng 021-51666711

Wang Zihan 021-51666914

Wang Jie 021-51595902

Zhang Haohan 021-51666752

Chen Bolin 021-51666836

Xu Mengqi 021-20707868