Cobalt, lithium prices little changed in muted pre-holiday trading

SHANGHAI, Jan 20 (SMM) – The price rally of refined cobalt in China slowed last week as more downstream producers were away for the Chinese New Year holiday. Expectations of a further increase in prices triggered some downstream purchases, and this lifted prices. 

Prices of lithium salts held stable last week amid muted trades as downstream materials producers concluded stockpiling on the suspension of logistics. 

SMM expects bullish sentiment about cobalt prices to sustain over a period of time after the holidays, with support from an upward trend in seaborne cobalt prices. The strength of downstream demand will determine the domestic price trend of cobalt in the first quarter. 

Prices of lithium carbonate may remain under downward pressure post-holiday as the destocking continues. The resumption schedules vary at different lithium carbonate producers.

China’s production and sales of new energy vehicles extended their decline in the second half of 2019 due to national subsidy phase-down, according to industrial data released last week. Sales of new energy passenger vehicles and commercial EVs declined steeply in the second half of the year, with full-year production and sales both saw negative growth.

Data from the China Association of Automobile Manufacturers (CAAM) showed that NEV production and sales in China stood at 1.24 million units and 1.21 million units in 2019, down 2.3% and 4% from a year earlier. NEV output and sales rose on a monthly basis in December, but were significantly lower from a year ago. 

China’s production of power batteries came in at 6.2GWh in December, 22.9% lower on the year and 31.4% lower on the month, according to data from the China Automotive Power Battery Industry Innovation Alliance. Among this, production of ternary batteries shrank 0.7% on the year and 10.2% on the month to stand at 4.8GWh, accounting for 77.8% of the total production. Output of lithium iron phosphate (LFP) batteries was down 57.2% on the year and 67.4% on the month in December, and took up 19% of the total production. 

Lacklustre demand in the power battery market in December drove up inventories at battery producers, and this accounted for the smaller production of ternary and LFP batteries in December.  

Full-year production of power batteries in China stood at 85.4GWh in 2019, 21% higher than in 2018. Among this, output of ternary batteries rose 40.8% on the year, while production of LFP batteries fell 1.2%. 

In the week ended January 17, prices of refined cobalt and cobalt hydroxide remained unchanged from a week earlier at 272,000-280,000 yuan/mt and $9.4-10.2/lb, respectively. 

Pre-holiday subdued consumption of refined cobalt in the Chinese market drove some medium-scale and small plants to destock in the second half of the week, even as major producers raised offers on the back of higher seaborne prices in the first half of the week. The signing of long-term purchasing contracts of cobalt hydroxide in the domestic market is expected in the near term. 

SMM assessed the average prices of cobalt sulphate at 48,500-51,000 yuan/mt last week, 1,500 yuan/mt higher than a week earlier, with prices of cobalt chloride also rising 3,750 yuan/mt, to stand at 59,000-62,000 yuan/mt. Prices of battery-grade nickel sulphate, meanwhile, held unchanged on the week at 24,500-25,000 yuan/mt.

Prices of cobalt salts extended their increase last week as bullish prospects for prices bolstered downstream purchases. Some major consumers continued to restock before the holidays. 

According to SMM assessments, prices of cobalt (II, III) oxide also climbed, by 5,000 yuan/mt last week to 185,000-195,000 yuan/mt, due to higher prices of cobalt salts and insufficient inventories of cobalt (II, III) oxide.

Some downstream consumers of cobalt (II, III) oxide locked in deals post-holiday on expectations of a further increase in prices. 

For the week ended January 17, SMM assessed prices of ternary precursor NCM523 at 80,000-83,000 yuan/mt, up 1,000 yuan/mt on the week, with prices of NCM622 stabilising at 86,000-89,000 yuan/mt.

Higher cobalt prices were the driver behind the rise in ternary precursor prices. Trades were quiet last week as most downstream ternary material plants had finished restocking. SMM expects prices of ternary precursor to hold steady in the run-up to the Chinese New Year holiday.

SMM assessed prices of both battery- and industrial- grade lithium carbonate flat on the week, standing at 47,000-50,500 yuan/mt and 37,000-40,000 yuan/mt, respectively. 

Inquiries improved from downstream material producers last week. There remained some demand from cathode material producers, and trades mostly occurred at low prices in cash terms. The lithium carbonate price discussion for 2020 long-term purchase agreement has commenced between suppliers and downstream buyers. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) were also flat on the week at 52,000-57,000 yuan/mt.

Domestic trades of lithium hydroxide thinned as logistics services have been halted. But prices of high-quality battery-grade lithium hydroxide remained firm on the back of tight supply since end-December and an absence of production cut schedule for the material during the upcoming holiday, SMM learned from market participants. 

Prices of LCO, which is used to produce 4.35V batteries, edged up 2,500 yuan/mt on the week to 195,000-215,000 yuan/mt, SMM assessed.

Additions of some new orders at top producers lifted prices of LCO last week. SMM expects the prices to stabilise after holidays and the downstream demand may unlikely to pick up until the second quarter. 

Increase in prices of upstream ternary precursor prompted some ternary material producers to raise offers, but this failed to be accepted by downstream battery plants. Traded prices remained at levels before the New Year’s Day. SMM forecasts prices of ternary materials to follow raw materials higher after the CNY holiday. 

SMM assessments showed that prices of LFP used in power batteries were also flat on the week at 39,000-42,500 yuan/mt. 

While prices of feedstock lithium carbonate inched down last Friday, prices of LFP limitedly changed as downstream battery producers have mostly suspended operations, which drove LFP producers to halt production. Demand for LFP is expected to recover after the CNY holiday as some battery plants plan for earlier resumption of operations. 

SMM assessed prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries and prices of LMO used in power batteries remained changed on the week, at 22,000-31,000 yuan/mt and 34,500-36,500 yuan/mt, respectively.

Some downstream battery plants had concluded procurement for the production of the last batch of products pre-holiday. Some LMO producers shut down last week, further adding to weakness in the market.