Cobalt salt prices bottomed out, demand for cathode materials fell

SHANGHAI, Dec 17 (SMM) – Prices of cobalt salts in China’s spot market have bottomed out, and prices of cobalt (II, III) oxide and ternary precursor extended their weakness with inventory pressure. 

Trades in the cathode materials market were lower last week as consumption waned with downstream producers entering a destocking period. 

Cobalt prices are expected to move rangebound at low levels this week, while lithium carbonate prices will see further downsides until the Chinese New Year holiday. The average price of battery-grade lithium carbonate in December may fall to 51,000 yuan/mt. 

On the data front, China’s production and sales of new energy vehicles (NEVs) continued to fall on a yearly basis in November, showed data from the China Association of Automobile Manufacturers (CAAM). 

Domestic sales of NEVs fell for the fifth straight month in November, by 43.7% from a year ago to 95,000 units. NEV production was 36.9% lower year on year, standing at 110,000 units in November. On a monthly basis, production and sales of NEVs last month climbed 2.5% and 9.1%, respectively. 

SMM estimate a negative growth in NEV production in 2019 on the back of national subsidy cuts. 

According to CAAM data, production of power batteries in China posted a year-on-year increase in November, especially lithium iron phosphate (LFP) batteries, whose output stood 34.1% higher from a year ago. The year-on-year rise in LFP batteries was seen as early as September, when production of cathode materials rose. 

SMM learned that major battery producers in China had plans to shift to LFP batteries in the fourth quarter. Inventory of power batteries will face upward pressure if NEV production fails to recover in the first quarter 2020.

In the week ended December 13, prices of refined cobalt again fell 2,000 yuan/mt to stand at 250,000-266,000 yuan/mt, after prices stabilised in the prior week, SMM assessed. Prices of cobalt hydroxide also eased $0.2/lb on the week to $9.4-10.2/lb. 

Offers of refined cobalt held relatively firm at most domestic producers, while downstream buyers purchase as required. Producers of cobalt hydroxide also keep discounts steady before the Christmas holiday, but it may take some time for trades to pick up as domestic consumers remained cautious. 

Last week, SMM assessed the average prices of cobalt sulphate flat at 42,000-45,000 yuan/mt, suggesting that prices of cobalt salt might have bottomed out. Meanwhile, prices of cobalt chloride and battery-grade nickel sulphate both slipped 500 yuan/mt on the week to 52,000-54,000 yuan/mt and 24,500-25,000 yuan/mt, respectively. 

Demand for cobalt salts remained subdued, but high costs supported offers at producers. Cheap cargoes, which is of limited availability, were quickly bought by downstream consumers. 

Prices of cobalt chloride will remain in premiums against cobalt sulphate as demand for cobalt chloride from the digital market weakens at a much slower pace and producers of cobalt chloride have greater bargaining power in a more concentrated market.

According to SMM assessments, prices of cobalt (II, III) oxide extended decline by 4,500 yuan/mt last week to 167,000-177,000 yuan/mt as consumers withheld from purchasing.

Large producers reduced quotes but this barely improved transactions. 

For the week ended December 13, SMM assessed prices of ternary precursor NCM523 and NCM622 both lost 500 yuan/mt on the week, to 77,000-80,000 yuan/mt and 87,000-90,000 yuan/mt, respectively. 

Battery producers moved to clear inventories at year-end, which depressed orders for ternary precursor and weighed on its prices. Cash-in inclination and inventory pressure at ternary precursor producers was also the driver behind lower prices. 

SMM learned that reduced prices failed to attract downstream buying interest. This, coupled with low prices of raw material nickel and a sharp drop in orders for NCM622, will likely put further downward pressure on near-term prices of ternary precursor. 

SMM assessed prices of battery-grade lithium carbonate at 50,500-53,000 yuan/mt, down 750 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 40,500-44,000 yuan/mt, 1,000 yuan/mt lower on the week. 

The consecutive decline in lithium carbonate prices has driven smelters in Jiangxi province into production cut or suspension. Some producers with spodumene as feedstock said they will consider output cut if prices fall below 50,000 yuan/mt. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) at 52,000-57,000 yuan/mt, down 1,000 yuan/mt from a week ago.

Consumption of lithium hydroxide is expected to remain sluggish till year-end. There remains further downside potential in prices as small and medium-scale producers may further cut offers to boost sales. 

Nonetheless, high-end prices of lithium hydroxide may stabilise in the first quarter of 2020 with orders at large mills picking up with the start of procurement by foreign carmakers including Tesla, Volkswagen and BMW. 

Prices of lithium cobalt oxide (LCO), which is used to produce 4.35V batteries, continued to fall but at a slower pace, dipping 2,000 yuan/mt week on week to 198,000-213,000 yuan/mt, SMM assessed. 

A large-scale selloff has not occurred in the LCO market as inventory pressure at producers eased lightly. But lower prices of raw materials will continue to keep LCO prices under pressure. 

SMM assessed prices of ternary material NCM523 and NCM622 at 127,000-137,000 yuan/mt and 146,000-154,000 yuan/mt, respectively, both down 1,000 yuan/mt on the week, smaller than drops of 3,000-4,000 yuan/mt in the previous week. 

A pickup in downstream demand remained absent, resulting in muted trades. Most producers of NCM622 stopped lowering offers as downstream demand was too weak that even price cut could not make any difference. 

SMM assessments showed that prices of LFP used in power batteries were unchanged on the week at 42,500-45,500 yuan/mt, but near-term prices may face downside risk if lithium carbonate prices extend decline.  

SMM assessed prices of lithium manganese oxide (LMO) used in high-energy-density lithium-ion batteries flat on the week at 23,000-31,000 yuan/mt, while prices of LMO used in motive batteries fell by 500 yuan/mt, to 35,000-37,000 yuan/mt.

LMO producers reduced prices to destock last week. Small and medium-sized LMO producers may plan in advance for scaling back production as a slow season for the consumer goods market set in.