Pessimism expands declines in prices of cobalt, lithium products on week

SHANGHAI, Jul 8 (SMM) – A lack of confidence across market participants accelerated declines in prices of cobalt, lithium products in the week to Friday July 5. SMM retains a pessimistic outlook on the demand for power batteries in the third quarter, especially for ternary, lithium iron phosphate (LFP) batteries. This will continue to pressure prices of lithium salts and intermediate products of cobalt. 

Demand for new energy vehicles (NEVs) was squeezed by cheaper automobiles with lower emission standards, as sellers destocked on the imposition of new, tougher national emission standards for cars. This is likely to further weigh on consumption of NEVs in the short term. 

The end of grace period for NEV subsidy cuts took a toll on the new energy sector, with current operating rates across power battery producers below 50%. 

LFP batteries industry and its upstream cathode materials sector are more concentrated, after an industrial reshuffle in 2018. At present, LFP batteries are applied in the power market, with limited support from the developing market of energy storage. 

Lower demand continued to drag on battery prices, as prices of a ternary battery cell dipped to 0.85 yuan/Wh, and prices of an LFP cell to 0.65 yuan/Wh as of July 5. 

SMM expects operating rates across power battery producers to remain at lows in July, as mills destock and upgrade. 

Brisk demand from electric bicycles and power tools will support production of consumer ternary batteries in the short term, but intensified competition will phase out excessive, low-end capacity in the second half of the year as production cuts of power batteries transfer considerable capacity to the consumer battery market. 

Declines in prices of refined cobalt accelerated as overseas offers fell to the lowest this year and exacerbated pessimism. Trades thinned last week. A broad decline in prices of cobalt-related produces kept smelters’ psychological prices for cobalt hydroxide at lows.

SMM assessed prices of refined cobalt at 220,000-233,000 yuan/mt in the week to Friday July 5, down an average 11,000 yuan/mt from the previous week. Prices of cobalt hydroxide stood at $8.3-8.5/lb, down an average $0.1/lb.

The cobalt, nickel salt markets extended their weakness as sellers offloaded cargoes at lower prices amid an intensified bearish outlook. Weaker demand for ternary precursor and capacity shifting from cobalt sulphate to nickel sulphate at some producers also depressed prices of nickel salts. 

Prices of cobalt sulphate came in at 36,000-38,000 yuan/mt, down an average 2,000 yuan/mt on the week, while prices of cobalt chloride slid an average 2,000 yuan/mt, to stand at 43,000-45,000 yuan/mt, according to SMM assessment. Prices of nickel sulphate also fell 500 yuan/mt on the week, standing at 22,500- 26,000 yuan/mt.

Prices of cobalt (II, III) oxide dipped significantly last week, dragged by a seasonal lull and a quiet ternary market. SMM assessed prices of cobalt (II, III) oxide at 156,000-158,000 yuan/mt, down an average 9,500 yuan/mt on the week.

Poorer consumption and lower prices of raw materials also cut ternary precursor prices. Sellers destocked actively and there were no signs of a significant pickup in demand. 

In the week to Friday July 5, prices of both NCM523 and NCM622 lost an average 7,000 yuan/mt on the week, to stand at 70,000-72,000 yuan/mt and 76,000-78,000 yuan/mt, respectively. 

Considerably weaker demand for battery-grade lithium carbonate drove sellers to slash offers. Prices of industrial-grade lithium carbonate also extended their declines, but at a slower pace. SMM learned that some producers of battery-grade lithium carbonate moved some capacity to industrial-grade lithium carbonate. 

Offers of battery-grade lithium carbonate at small producers were heard at a low of 70,000 yuan/mt, and offers for industrial-grade lithium carbonate at a large mill in Qinghai also decreased, by 3,000 yuan/mt last week. 

SMM assessed prices of battery-grade lithium carbonate at 71,000-74,000 yuan/mt, down an average 1,000 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 64,000-67,000 yuan/mt, down 1,500 yuan/mt week on week. 

Last week, prices of battery-grade lithium hydroxide continued to trend downwards, but this failed to encourage purchases. As of Friday July 5, prices of battery-grade lithium hydroxide (coarse particle) shrank an average 2,000 yuan/mt on the week, to stand at 81,000-83,000 yuan/mt, SMM assessed.

Expectations of further downside room in prices of cobalt, lithium products held consumers from purchasing and depressed prices of lithium cobalt oxide (LCO). Large producers of LCO slowed operation last week. 

SMM assessed prices of LCO used to produce 4.35V batteries at 200,000-210,000 yuan/mt, down an average 6,000 yuan/mt from the previous week.

Ternary materials saw a distinct overcapacity as inventories rose steeply on large-scale production cuts across downstream battery producers. Ternary material plants continued to offload cargoes actively as falling prices of nickel, cobalt raw materials kept them from holding high inventories. SMM expects poor demand from the battery market to prompt ternary materials mills to cut operating rates in July. 

SMM assessed that prices of NCM523 materials fell 6,000 yuan/mt last week, to stand at 125,000-133,000 yuan/mt, and prices of NCM 622 also shrank 6,000 yuan/mt, posting 141,000-148,000 yuan/mt.

Prices for lithium manganese oxide (LMO) held stable last week. Most LMO producers reported fewer orders from the digital sector for July as a slow season set in. They also saw more sellers for industrial-grade lithium carbonate, a raw material to produce LMO.

SMM assessed prices of LMO, used in high-energy-density lithium-ion batteries, remained unchanged on the week at 30,000-38,000 yuan/mt, and prices of LMO used in motive batteries stood flat at 47,000-50,000 yuan/mt. 

Prices of LFP edged lower last week as downstream orders shrank significantly on production cuts. Orders are expected to improve in July, but sluggishness will linger through the third quarter. Orders from the energy stage sector remained firm. 

In the week to Friday July 5, prices of LFP used in power batteries stood at 46,000-49,000 yuan/mt, down an average 1,000 yuan/mt on the week, SMM assessed.