Cobalt prices underpinned by COVID-19 crisis in Congo, lithium carbonate prices likely to rebound in short term

SHANGHAI, Jul 14 (SMM) – Near-term prices of cobalt may find some support as stockpiling demand for cobalt salt increased last week after some workers in mining areas of Congo were tested positive for the coronavirus.

An uptick in industrial-grade lithium carbonate prices last week lifted market sentiment. In the long term, prices of industrial-grade lithium carbonate will remain closely linked to prices of battery-grade lithium carbonate, and the destocking will continue in the sector. A turning point in demand will likely trigger upward momentum in lithium carbonate prices as the prices have already declined to the bottom levels.

SMM assessed that prices of refined cobalt stemmed decline in the week ended July 10, holding flat from a week ago at 230,000-245,000 yuan/mt. Prices of cobalt intermediate products were also largely unchanged on the week at $9.8-10.3/lb.

Reports of confirmed cases of COVID-19 in mining areas of Congo have prompted refined cobalt sellers in China to raise their offers, but trades remained muted as consumers had sufficient raw materials inventories.

Sellers of cobalt intermediate products tended to hold back their cargos to the spot market as pandemic uncertainty in Africa has led to a widespread delay in shipments. However, purchases of spot cobalt intermediate products weakened with the gradual arrival of seaborne cobalt raw materials at domestic cobalt salt producers. This is expected to weigh on prices of cobalt intermediate products in the near term.

SMM assessed prices of battery-grade lithium carbonate flat from a week ago, standing at 39,000-41,000 yuan/mt as of July 10, with prices of industrial-grade materials rising 250 yuan/mt on the week to 32,000- 37,000 yuan/mt.

Major producers of industrial-grade lithium carbonate in Qinghai lifted prices on lower supplies, and this may drive some other plants to follow suit. However, there remains uncertainty about a near-term price rally as some producers may cut prices to sell off. Amid existing inventory pressure, prices of battery-grade lithium carbonate will face headwinds to recover if downstream demand fails to significantly improve. Nonetheless, the recent rebound in industrial-grade material may cap any downsides in battery-grade lithium carbonate prices and hold prices stable in the short run.

On the downstream front, China’s production and sales of new energy vehicles (NEVs) in June increased 21.3% and 26.8% respectively from a month ago while productions and sales fell 25% and 33.1% from a year ago to 102,000 units and 104,000 units respectively, showed data from the China Association of Automobile Manufacturers (CAAM).

Production and sales of pure electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) both expanded month on month in June, with readings for EVs posted faster growth. On a yearly basis, production and sales of EVs remained lower in June, while production of PHEVs rose with sales edging lower.

According to industrial data compiled by SMM, capacity of power batteries installed on NEVs stood at 4.7GWh in June, up 33.9% on the month while down 28.9% on the year. Installed capacity of lithium iron phosphate (LFP) batteries markedly increased from a month ago in June, driven by a rise in output of new energy commercial vehicles and a higher proportion of passenger vehicles that adopt LFP batteries, which were mostly seen in models of SAIC-GM-Wuling Automobile, Dongfeng Xiaokang and Huachen Xinyuan. Production of BYD’s Han EV had not commenced as of June.