Cobalt sulphate prices show signs of weakness, with lithium salt prices facing downward pressure

SHANGHAI, Oct 28 (SMM) – SMM retains the view that cobalt prices will trade rangebound for the remainder of the year. Lithium prices may struggle to recover for the rest of the year with excessive spodumene stockpiles needed to deplete even as the buildup of ore inventories will slow down on delayed production at miners. 

China vowed to further expand its new energy vehicle market, mulling a goal of 20% of all automobiles sold in the country to be electric by 2025, with the share expanding to 40% by 2030, according to the latest auto industry development plan for 2021-2035 drafted by the Ministry of Industry and Information Technology. 

Despite weaker-than-expected NEV production this year, SMM holds a bullish outlook on the long-term development of China’s NEV market in the ongoing global trend of electrification. The incentive dual-credit policy and ramp-up investment in supporting facilities will also drive domestic growth of NEV sales and production. 

SMM expects output of NEVs and power batteries in China to accelerate increase in 2020 as Tesla and other foreign automakers tout the Chinese market. 

Domestic NEV production is likely to rise 8% from a year ago to stand at 1.35 million units in 2019, according to SMM estimates. The growth rate is expected to expand to 33% in 2020, resulting in an output of 1.8 million units that year. 

SMM sees the installed capacity of power batteries in China rising 8% year on year to 64GWh in 2019, and increasing 30% to 83GWh next year. 

During 2016-2020, domestic demand for NEVs and power batteries will see compound annual growth rates (CAGR) of 36.7% and 30.8%, respectively, SMM forecasts. 

Last week, domestic prices of refined cobalt continued to hold steady amid subdued trades and flat offers overseas. Quotes by major producers in north China remained firm. Expectations of potential decline in prices deterred downstream purchases of cobalt hydroxide, while some sellers showed offloading inclinations. 

SMM assessed traded prices of refined cobalt flat at 285,000-295,000 yuan/mt in the week of October 25, with prices of cobalt hydroxide also stabilising at $11-12/lb.

Prices of cobalt sulphate showed signs of weakness as pessimistic outlook drove medium-scale and small producers to cut offers down to 55,000 yuan/mt, for cobalt sulphate that produced with scrap as feedstock. Large producers held quotes firm at 60,000 yuan/mt, but trades were close to stagnant.

Prices of cobalt chloride, meanwhile, remained above 70,000 yuan/mt, on the back of healthy demand. 

SMM assessed the average price of cobalt sulphate remained unchanged from a week ago at 56,000-60,000 yuan/mt, with prices of cobalt chloride flat at 71,000-76,000 yuan/mt. Prices of battery-grade nickel sulphate were little changed on the week at 30,000 – 31,000 yuan/mt.

Concerns about lower prices depressed trades of cobalt (II, III) oxide last week, while the prices held flat on the week at 220,000-230,000 yuan/mt, according to SMM assessments. Major mills were unwilling to sell at lower prices, and this led to deadlock in the spot market. 

SMM sees downward risks in nearby prices of cobalt (II, III) oxide given lower costs of feedstock cobalt sulphate. 

Prices of ternary precursor will also face downward potential on price decline in cobalt sulphate. 

For the week ended October 25, SMM assessed prices of NCM523 and NCM622 unchanged at 101,000-106,000 yuan/mt and 108,000-112,000 yuan/mt, respectively. Transactions were weak with traders fulfilling previous orders in the middle of a month. 

Despite cost pressure at producers, prices of lithium carbonate continued to edge lower in a buyer’s market. Consumers withheld from buying expensive products amid sufficient supplies, and this capped any upside room in prices of industrial-grade lithium carbonate. 

Last week, SMM assessed prices of industrial-grade lithium carbonate at 48,000-52,000 yuan/mt, down 500 yuan/mt on the week, while prices of battery-grade lithium carbonate stabilised at 58,000-61,000 yuan/mt.

Prices of battery-grade lithium hydroxide (coarse particle) stemmed decline from the previous week and held steady at 61,000-66,000 yuan/mt in the week of October 25. 

Domestic development of high-nickel battery market, an essential downstream sector for lithium hydroxide, remained at a modest pace, with trades of lithium hydroxide centring on several major producers. A stable customer base kept large mills operating at close to full capacity, while lower margins and softened demand slowed operation of small and medium-sized producers. 

Little development in the power battery market and stable demand from digital devices kept prices of ternary materials stable, with prices of NCM523 and NCM622 standing at 147,000-155,000 yuan/mt and 165,000-172,000 yuan/mt, respectively.

Orders for ternary materials from NEV producers may further shrink in the fourth quarter, with poor delivery to end-users. 

Despite brisk demand since the fourth quarter, prices of LFP material continued to trend downward on lower prices of lithium carbonate, which is used to produce LFP, and reduced costs after producers resumed to normal production. Bargaining power of downstream battery mills outweighed that of LFP producers. 

SMM assessments indicated that prices of LFP used in power batteries lost 500 yuan/mt on the week and came in at 42,500-45,500 yuan/mt.

Stable supply and demand kept prices of lithium manganese oxide (LMO) little changed last week. SMM assessed prices of LMO used in high-energy-density lithium-ion batteries at 26,000-32,000 yuan/mt and prices of LMO used in motive batteries at 43,000-45,000 yuan/mt.