Cobalt prices rose on speculative prospects, lithium carbonate fundamentals remained weak

SHANGHAI, Jan 6 (SMM) – Prices of cobalt products in China edged higher last week as sellers firmed up offers on the prospects for greater speculative demand. Spot trades were muted as year-end restocking ended, which slowed any price decline in the market. 

SMM expects cobalt prices to stay at low levels before the Chinese New Year holiday, with little chance of recovery for lithium carbonate prices as fundamentals barely improve. 

Major power battery producer in China had mostly halted production and finished stockpiling raw materials by end-December, market participants told SMM. Other battery companies are expected to close for the holiday from mid-January. 

US electric vehicle maker Tesla had cut the starting price for its China-made Model 3 sedans by 32,000 yuan to 299,050 yuan after receiving Chinese subsidies for new energy vehicles. This is estimated to have a major impact on domestic NEV models that boast cost-effectiveness with relatively low driving ranges. 

There are currently several NEV models priced between 280,000-320,000 yuan in the Chinese market, including traditional carmaker BYD’s Tang series and SAIC Roewe’s Marvel X, as well as vehicles from emerging company WM Motor and P7 from Xpeng Motors.

Tesla's brand effect and competitive prices can be attractive to Chinese consumers as the growth of domestic NEV market is shifting from subsidy-driven towards consumption-driven. It is therefore crucial for Chinese carmakers to find an effective way to cut costs through technology upgrades and purchasing strategies and build their niche markets in 2020. 

In the week ended January 3, prices of refined cobalt edged up by 8,000 yuan/mt from a week ago to 261,000-271,000 yuan/mt, with the improved speculative sentiment, SMM assessed. Prices of cobalt hydroxide stood flat on the week to $9.4-10.2/lb.

Spot trades of refined cobalt remained limited. Some producers of cobalt hydroxide were willing to increase inventories on the prospects for a pickup in downstream demand in 2020. 

SMM assessed the average prices of cobalt sulphate at 44,500-46,500 yuan/mt last week, 1,500 yuan/mt higher than a week earlier. Prices of cobalt chloride and battery-grade nickel sulphate, meanwhile, held unchanged at 53,500-55,500 yuan/mt and 24,500-25,500 yuan/mt, respectively. 

Prices of cobalt salts moved close to their costs, with some signs of recovering as some downstream buyers stockpiled slightly on concerns about a further increase in prices. 

According to SMM assessments, prices of cobalt (II, III) oxide also rebounded, by 3,000 yuan/mt last week to 169,000-178,000 yuan/mt, due to higher prices of cobalt salts.

Pre-holiday purchases of cobalt (II, III) oxide by downstream lithium cobalt oxide (LCO) producers drew close to an end, resulting in muted trades last week. 

For the week ended January 3, SMM assessed prices of ternary precursor NCM523 at 76,000-80,000 yuan/mt, up 500 yuan/mt on the week, with prices of NCM622 stabilising at 86,000-89,000 yuan/mt. 

Termination of year-end markdown sales saw inventories of ternary precursor returning to normal levels at major producers. This, together with increased prices of raw material cobalt sulphate, drove up prices of ternary precursor.

Nonetheless, consumption is likely to weaken in the weeks ahead, as downstream ternary material producers will slow operation or take holiday in advance for the Chinese New Year, after they finish restocking since late-December. 

SMM assessed prices of battery-grade lithium carbonate at 48,000-51,500 yuan/mt, down 500 yuan/mt on the week, and prices of industrial-grade lithium carbonate at 38,000-41,000 yuan/mt, 1,250 yuan/mt lower on the week.

Trades were subdued as downstream cathode material producers had mostly completed stockpiling. Industrial-grade lithium carbonate plants still saw margins. This allowed some of them to lower prices to attract purchases by lithium manganese oxide (LMO) and lithium iron phosphate (LFP) producers. But the overall decline in prices was capped as most companies withheld from marking down. 

The price range of battery-grade lithium carbonate widened on the back of industry-wide production cuts in the power battery market, albeit decent demand from the digital battery sector. Producers of high-quality battery-grade lithium carbonate found it difficult to sell, but they showed limited inclination to slash prices to secure market share. 

SMM assessed prices of battery-grade lithium hydroxide (coarse particle) flat on the week 52,000-57,000 yuan/mt, amid holiday-thinned trades. 

Major producers of battery-grade lithium hydroxide planned for continuous production during the Chinese New Year holiday, in preparation for a revival in orders this year. 

Prices of LCO, which is used to produce 4.35V batteries, also held unchanged on the week at 195,000-210,000 yuan/mt, SMM assessed.

Year-end destocking activities concluded at most battery materials producers. An absence of a significant recovery in downstream demand kept trades quiet. 

SMM assessed prices of ternary material NCM523 tracked prices of ternary precursor higher to 126,000-137,000 yuan/mt, up 500 yuan/mt week on week, with prices of NCM622 flat at 145,000-153,000 yuan/mt.

Ternary material companies had finished year-end buying and may unlikely purchase ternary precursor before holiday, without any major order from the downstream. Substantial year-end output cuts at battery makers trimmed orders, even as materials producers reduced offers in the previous weeks. 

SMM assessments showed that prices of LFP used in power batteries were down 450 yuan/mt on the week to 39,000-42,500 yuan/mt. 

Decline in prices of lithium carbonate weighed on prices of LFP, which have approached its costs. Demand remained sluggish as nearly 90% of downstream battery producers that use LFP as feedstock had suspended production. LFP producers preferred cash trades in order to guarantee cash flows, and this further depressed trade volumes. 

SMM assessed prices of LMO used in power batteries limited changed at 34,500-36,500 yuan/mt on the week. 

LMO producers did not have to cut prices to boost sales given current low inventories. Orders from the digital battery market shrank 20%-30% from a month ago in December, as a slow season set in. Year-end stockpiling from the digital battery market commenced two weeks earlier, but overall transaction volumes were limited.