Cobalt prices extended slide, lithium prices found little support from power battery market

SHANGHAI, Mar 16 (SMM) – The price spread of domestic and overseas cobalt continued to expand, which coupled with rising inventories of cobalt salts in China, added to bearish and cautious sentiment in the market. In the lithium sector, demand recovery in the downstream power battery market remained slow and barely supported prices of battery-grade lithium carbonate. The revival of the digital devices market underpinned prices of industrial-grade lithium carbonate.

SMM expects the near-term price development of battery raw materials to be determined by expectations of demand recovery. If the global coronavirus outbreak fails to be effectively addressed in the second quarter, subdued downstream demand may continue to depress prices of upstream raw materials. 

According to data from the China Association of Automobile Manufacturers (CAAM), China’s production and sales of new energy vehicles (NEVs) in February were badly hit by the COVID-19 pandemic, falling 82.9% and 75.2%, respectively, from the same period last year to 9,951 units and 12,908 units. Production and sales of pure electric vehicles and plug-in hybrid vehicles shrank significantly, both on a monthly and yearly basis. 

China’s production of power batteries declined 81.3% year on year to 0.9GWh in February, 8.6% higher than January, according to data from the China Industry Technology Innovation Strategic Alliance for Electric Vehicles. Among this, the output of ternary batteries accounted for 0.5GWh, down 84.7% on the year while up 26.5% on the month. Production of lithium iron phosphate (LFP) batteries fell 73.7% on the year and 3.6% on the month to 0.4GWh in February. 

Continued weakness in the NEV market kept operating rates of medium-scale and small producers of power batteries at low levels last week. It is estimated that NEV production and sales may only return to normal levels in April-May. Improved consumption in the consumer battery market boosted operations of digital battery producers, but the rise in overall operating rates was limited given the slower-than-expected return of workers and pre-holiday backlogged cargoes at medium-scale and small plants. 

In the week ended March 13, prices of refined cobalt extended their slide by 8,500 yuan/mt from the previous week to 260,000-275,000 yuan/mt, while prices of cobalt hydroxide held stable at $9.8-10.6/lb, SMM assessed.
Refined cobalt prices in the overseas market edged lower last week, which grew bearish prospects in the domestic market and drove sellers to cut offers to destock. Consumers of cobalt hydroxide hesitated over falling prices of smelted finished products, and trades of cobalt hydroxide were muted last week. 

SMM assessed the average prices of cobalt sulphate at 52,000-55,000 yuan/mt last week and prices of cobalt chloride at 62,000-66,000 yuan/mt, down 2,500 yuan/mt and 3,000 yuan/mt, respectively, from a week ago. Prices of battery-grade nickel sulphate lost 150 yuan/mt on the week to 23,500-24,500 yuan/mt.
Inventories of cobalt salts piled up at producers, as downstream buyers were on the sideline and made limited purchases. Greater cash flow burdens drove producers to cut prices of products with raw materials cost advantages. 

According to SMM assessments, prices of cobalt (II, III) oxide fell 2,500 yuan/mt on the week to 205,000-210,000 yuan/mt, on the back of declines in cobalt salt prices. 

Some downstream major producers of cathode materials signed purchase contracts for lithium cobalt oxide (LCO) while only procured small amounts of cobalt (II, III) oxide. The higher concentration ratio of the cobalt (II, III) oxide market granted greater bargaining power of the producers, compared with that of cobalt salt producers. Cobalt (II, III) oxide prices face further downward risk next week if cobalt salts prices continue to fall, but the decline in cobalt (II, III) oxide will be smaller than that of cobalt salts. 

SMM assessed prices of ternary precursor NCM523 at 83,000-86,000 yuan/mt for the week ended March 13, down 1,500 yuan/mt from the prior week, with prices of NCM622 dipping 500 yuan/mt to 88,000-91,000 yuan/mt.
Sufficient inventories of raw materials and pessimistic outlook for precursor prices kept downstream battery materials plants from purchasing ternary precursor last week. SMM expects further declines in prices of ternary precursor if downstream demand remains sluggish. 

SMM assessed prices of battery-grade lithium carbonate flat on the week, at 47,500-50,500 yuan/mt, with prices of industrial-grade materials stabilising at 38,000-42,000 yuan/mt.
Some industrial-grade lithium carbonate producers are mulling lifting prices after they newly signed some orders, in anticipations of further demand pickup. But market participants are also cautious about the resumption of shipments from some producers in Qinghai to hit prices of lithium carbonate. Despite significant cost pressure, quotes of battery-grade lithium carbonate have shown signs of pulling back due to weakness in the power battery market. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) unchanged on the week at 53,000-59,000 yuan/mt.
While supply was tight from major lithium hydroxide plants amid stable demand, trades at medium-scale and small mills remained thin. 

Prices of LCO, which is used to produce 4.35V batteries, rose 7,500 yuan/mt from a week ago to 215,000-230,000 yuan/mt.
Increased downstream purchases from battery mills accounted for the rebound in LCO prices, but SMM expects the price rally unlikely to sustain next week given overall bearish prospects for cobalt prices. According to customers of SMM, downstream battery plants mostly made enquiries and purchases on a weekly basis, and LCO producers planned to follow the purchase frequency.

Prices of ternary material NCM523 lost 1,000 yuan/mt last week, to stand at 125,000-137,000 yuan/mt, with prices of NCM622 flat at 145,000-153,000 yuan/mt, SMM assessed.
Declines in ternary precursor prices led to lower prices of ternary materials last week. 

SMM assessments showed that prices of LFP used in power batteries flat on the week at 39,000-42,500 yuan/mt.
LFP prices have bottomed out and the operating rates of LFP producers were in gradual recovery, on expectations that downstream battery plants will normalise purchases by end-March. 

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 22,000-31,000 yuan/mt and 34,500-36,500 yuan/mt, respectively.
While key battery plants stepped up purchases, destocking inclination at small LMO producers capped any increase in overall LMO prices.