Cobalt, lithium prices remained under pressure from sluggish demand

SHANGHAI, Apr 14 (SMM) – Demand remained subdued in China’s cobalt market last week while a handful of consumers purchased as required. The market may find some near-term support from the extended national lockdown of South Africa, which will last until end April and aim to curb the COVID-19 pandemic.  

Inventory pressure in the lithium market further mounted as the supply of lithium carbonate increased while demand weakened. Demand will remain the determinant factor of near-term prices and producers may continue to destock at lower prices. SMM expects lithium salt producers to be compelled to cut production in Q2. 

Q1 production and sales of new energy vehicles (NEVs) in China fell from a year ago, but the data for March improved significantly from February, a sign that China’s NEV market is on course to recover.

According to data from the China Association of Automobile Manufacturers (CAAM), China’s production of NEVs (excluding Tesla models) stood at 50,000 units in March, down 56.9% on the year, with the NEV sales at 53,000 units, 53.2% lower on the year. In the first three months of the year, production and sales of NEVs in China came in at 105,000 units and 114,000 units, respectively, down 60.2% and 56.4% from the same period a year ago. 

China’s production of power batteries also rebounded in March as battery mills restarted production with a slowdown of the spread of the COVID-19 in the country. 

Domestic power battery output came in at 4.5GWh in March, down 45.5% on the year while up 396.6% on the month, showed data from the China Industry Technology Innovation Strategic Alliance for Electric Vehicle. Among this, production of ternary batteries jumped 600.5% on the month while fell 40.9% on the year, to 3.2GWh, accounting for 72.4% of the total production. Output of lithium iron phosphate (LFP) batteries increased 181.3% month on month while slipped 50.6% year on year, to 1.2GWh, taking up 27.6% of the total output. 

Orders for power ternary batteries reduced significantly in late March, and battery stockpiles at some battery plants piled up with the inventories of ternary materials declining. At present, the recovery of end-user demand in China remains slow and the pandemic overseas continues to constrain the export of Chinese batteries. The timing of a rally in downstream demand will be determined by the development of the COVID-19 out of China and the rollout of details for China’s 2020 NEV subsidy policy.

Prices of refined cobalt again declined in the week ended April 10, falling 5,000 yuan/mt from the previous week to 237,000-255,000 yuan/mt, while prices of cobalt hydroxide held stable at $9.8-10.6/lb, SMM assessed.
Muted trades in the spot market weighed on refined cobalt prices while some major producers tended to keep offers firm. Demand in the international market remained weak, as evidence by smaller orders for Chinese materials and falling overseas prices. 
The prolonged lockdown of South Africa threatens to disrupt deliveries of cobalt hydroxide to China, but this only limitedly lifted market sentiment as demand from the battery market has not yet rallied significantly and raw materials stockpiles at Chinese smelters remain sufficient. 

SMM assessed the average prices of cobalt sulphate at 44,000-47,000 yuan/mt last week and prices of cobalt chloride at 53,000-56,000 yuan/mt, down 500 yuan/mt and 2,000 yuan/mt, respectively, from a week ago. Prices of battery-grade nickel sulphate climbed 250 yuan/mt on the week to 23,000-23,500 yuan/mt.
Subdued downstream demand may continue to see producers destock at lower prices this week. 

According to SMM assessments, prices of cobalt (II, III) oxide shed 5,000 yuan/mt on the week to 175,000-180,000 yuan/mt.
Transaction volumes of cobalt (II, III) oxide increased last week and more new orders are expected this week, but the greater bargaining power of buyers may expand downsides in prices. 

SMM assessed prices of ternary precursor NCM523 at 74,000-76,000 yuan/mt for the week ended April 10, down 500 yuan/mt from the prior week, with prices of NCM622 stabilising at 80,000-83,000 yuan/mt.
Lower prices of feedstock cobalt sulphate, coupled with relatively weak demand from the power battery market and reduced orders in the digital battery market, accounted for the slide in ternary precursor prices. The downsides will be limited as prices have approached the production costs. 

SMM assessed prices of battery-grade lithium carbonate unchanged on the week at 45,000-48,500 yuan/mt, with prices of industrial-grade materials 250 yuan/mt lower at 37,500-41,000 yuan/mt.
Major producers in Qinghai and Sichuan kicked off maintenance last week, but no production cut or suspension was heard in other Chinese producers. Lithium carbonate prices will remain under pressure on the backdrop of thin trades of battery-grade lithium carbonate and reduced orders of industrial-grade materials. 
Overseas demand weakened since mid-March as the coronavirus-driven shutdown of South-east Asian factories that consumed Chinese digital battery materials led to the cancellation of orders. In the power battery market, sluggish end-users demand drove battery mills to delay purchases for raw materials since mid-March.

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) unchanged on the week at 53,000-59,000 yuan/mt. 

Export orders of lithium hydroxide remained steady. Prices of high-grade materials held firm due to tight availability, while the low-end prices may face downside risk as producers stepped up production while the growth of orders was limited. The domestic demand for lithium hydroxide mostly comes from the industry chains of LG and CATL. The Tesla Shanghai factory has ramped up close to full capacity. 

Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, lost 2,500 yuan/mt from a week ago to 208,000-212,000 yuan/mt, in line with declines in prices of raw materials such as cobalt salt and cobalt (II, III) oxide. 

Prices of ternary material NCM523 declined 1,500 yuan/mt last week, to 119,000-125,000 yuan/mt, with prices of NCM622 5,000 yuan/mt lower on the week at 136,000-142,000 yuan/mt, SMM assessed.
Declines in prices of ternary precursors drove down prices of ternary materials. Current ample stockpiles at power battery plants kept them from purchasing, and delay or cancellation of export orders also hurt demand for ternary materials. 

SMM assessments showed that prices of LFP used in power batteries fell 750 yuan/mt on the week to 38,000-42,000 yuan/mt.
LFP prices received little support from an increase in demand from the energy storage market, as battery plants demanded lower prices of LFP. 

Prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries and prices of LMO used in power batteries remained unchanged on the week, at 21,500-30,500 yuan/mt and 34,500-36,500 yuan/mt, respectively. 
The downward room in LMO prices will be capped as prices are close to costs.