Resumption of cobalt and lithium producers eased demand and supply fundamentals

SHANGHAI, Feb 20 (SMM) – Producers of cobalt and lithium products have recovered successively in Jiangxi, Jiangsu and Sichuan as of February 20. Smelters in Hubei, the epicentre of the coronavirus outbreak, remain suspended, while some plants in Hebei, Zhejiang, Guizhou and Yunnan plan to delay their resumption till next week. 

Producers in Hubei have not received official approval for recovery as of noon on February 20. Companies in Jiangxi are allowed to restart production after reporting to authorities. A slew of producers of cobalt salts, lithium salts, ternary precursor and lithium manganese oxide (LMO) in Jiangxi resumed this week, while some lithium iron phosphate (LFP) plants will reopen in early March.

In Jiangsu, producers in Wuxi restarted production earlier this month. Some production lines at plants in Haimen maintained operations over the Chinese New Year holiday, and some cobalt salts producers received the green light to restart work last Thursday and Friday. 

Lithium salts plants in Sichuan resumed operations this week, while several producers of ternary precursor and ternary materials have not been allowed to resume and may postpone the recovery till next week. 

Major producers in Hebei did not halt operations during the CNY holiday, but cut the operating rates to 30%. A handful of local producers plan to reopen next week. Zhejiang also saw more plants recovering production this week, but the continued strict regulations amid a virus outbreak will keep the operating rates at low levels in February. 

In Guizhou, major producers of ternary precursor continued to produce during the holidays, while some LMO plants resumed operations on February 20, with more producers to return next week. 

Some battery producers in Guangdong resumed operations this week. Recovery of some plants in Yunnan, however, has been delayed. Battery mills in Henan have not received official approval as the area was badly hit by the virus. 

On the raw material front, some cobalt salts plants continued to face import restrictions. But top producers of cobalt salts and batteries reported sufficient supply of raw materials that could guarantee production by end-February, primarily due to lower operating rates on the virus impact and stockpiles stored up pre-holiday. 

Most downstream producers also have raw materials that could meet demand till the end of this month, as they scaled back operations in February. Only several top producers of ternary precursor and ternary materials showed greater demand after they maintained production over the holidays. Bullish prospects for prices drove some large-scale producers of lithium cobalt oxide (LCO) to lock in orders of cobalt salts and cobalt (II, III) oxide. 

Import of intermediate product for hydrometallurgy may recover next week, SMM learned from market participants. But it requires time for smelters to normalise operations, which may see the operating rates this month only at 30-40%. 

Some logistics hurdles have been removed this week. The recovery of operating rates across the chain, however, remains at a slow pace due to the quarantine requirements for returning workers.