[SMM Notice] SMM Launches Discount Factors of Nickel, Cobalt and Lithium Metals Contained in Ternary Battery Scrap

SHANGHAI, Mar 30 (SMM) - In order to address the confusing pricing method in China's ternary battery recycling market and to reflect the real connection between nickel, cobalt, lithium metal prices and ternary battery scrap prices, SMM officially launched the SMM discount factors of metals contained in the ternary battery scrap on February 13, 2023 to replace the previous Ternary Black Mass Discount Factor 523 (10%<Ni<25%, 6%<Co<15%).

The new price indexes launched include:

Ternary Battery Tablet Black Mass Nickel Discount Factor

Ternary Battery Tablet Black Mass Cobalt Discount Factor

Ternary Battery Tablet Black Mass Lithium Discount Factor

Ternary Battery Black Mass Nickel Discount Factor

Ternary Battery Black Mass Cobalt Discount Factor

Ternary Battery Black Mass Lithium Discount Factor

(Hereinafter together referred to as "discount factors of metals contained in ternary battery scrap”)

1. Guidelines to SMM price assessment methodology

Shanghai Metals Market (SMM) is a completely independent third-party service provider that does not participate in any substantive transaction, and maintains close communication with the buyer or seller of the transaction as a market observer or organiser, and provides relevant service to the market. By consulting with independent industry participants, SMM drafts the methodology, examines and revises it regularly based on the specifications and terms of trade that are generally used in the market, with equal weighting given to transactions that meet the standards. 

SMM reserves the right to exclude any unreliable or unrepresentative price data from its price assessment, in line with this methodology and other related Benchmark governance policies and procedures. 

2. SMM discount factors of metals contained in ternary battery scrap

2.1 Significance of the launch of "discount factors of metals contained in ternary battery scrap"

Since 2022, with the rapid growth of lithium carbonate prices, the lithium battery recycling industry has witnessed unprecedented popularity. The traditional discount factor of nickel and cobalt contained in ternary battery scrap once exceeded 100% or even 200%, which overlooked too much value of lithium. As a result, the calculation of ternary battery recycling costs becomes increasingly confusing.

The problems of chaotic pricing scheme used in the lithium battery recycling industry is looming, and the most prominent one is the selection of benchmark price.

On the one hand, the nickel metal prices failed to be closely connected with the nickel salt prices for a long time as they were more vulnerable to the impact of its futures prices, which brought about overwhelming uncertainty in the nickel cost of recycling companies. On the other hand, the price spread between cobalt metal itself and cobalt metal contained in cobalt salt is huge, affected by the futures market and the metal's strong financial attributes.

Therefore, both nickel and cobalt metal prices are susceptible to uncertain factors such as the futures prices, market sentiment, and the stronger pricing power held by overseas miners, which makes them unreliable as benchmark prices in the lithium battery recycling industry.

The lithium cost used to be incorporated in the traditional discount factors of nickel and cobalt, and was not calculated independently until September 2022. However, there were varied choices for lithium benchmark price, including the prices of industrial-grade lithium carbonate, battery-grade lithium carbonate and lithium metals that all enjoyed growing popularity.

In conclusion, the costs of nickel, cobalt and lithium metals in ternary battery scrap were not clearly separated.

In order to address this issue and reflect the real connection between nickel, cobalt, lithium metal prices and ternary battery scrap prices, SMM officially launched the SMM discount factors of metals contained in the ternary scrap on February 13, 2023.

2.1 Definition

SMM discount factors of metals contained in the ternary scrap are assessed and reported based on the methodology defined in this document. As benchmark prices, they can be referred to by ternary battery scrap traders for their settlement price. The figures reflect the spot discount factors of metals contained in the ternary scrap that are the most tradable at the time of publication on each full trading day.

Conversion benchmark for discount factors of metals contained in ternary battery scrap:

Benchmark price for nickel element is calculated based on the average price of SMM battery-grade nickel sulphate (≥22%)

Benchmark price for cobalt element is calculated based on the average price of SMM cobalt sulphate (≥20.5%/domestic)

Benchmark price for cobalt element is calculated based on the average price of SMM cobalt carbonate (99.2% industrial grade/domestic)

Formula:

SMM battery grade nickel sulphate (≥22%) average price/22%*nickel discount factor*nickel content + SMM cobalt sulphate (≥20.5%/domestic) average price/20.5%*cobalt discount factor*cobalt content + SMM lithium carbonate (99.2% industrial grade/domestic) average price/18.79%*lithium discount factor*lithium content = Price of ternary battery scrap (the formula can also be applied to calculate the prices of ternary battery pole piece powder/battery powder based on corresponding coefficients)

2.3. Introduction of price assessment

SMM will review and standardise the collected data by eliminating outliers before offering a quote for the discount factors of metals contained in ternary battery scrap.  Every day, the designated pricing person will inquire about the prices, and put the information into the SMM internal system. Based on the spot transaction prices collected from the market entities, the market tradable prices shall be jointly confirmed by the buyers and the sellers, which thus meets the requirements of fairness, tradability, and reproducibility. The collected prices include the actual transaction prices provided by the enterprises in SMM enquiry.

2.4 Process of data collection

SMM price analysts will collect ternary battery scrap-related data information from submitters by means of phone, fax, email, QQ, WeChat and other forms of communication. The data will include traded prices within the day, and the most likely traded prices, bids and offers. All communication content on instant messengers, WeChat messaging and emails as well as face-to-face communication will be recorded, while phone communication via phone calls will also be recorded in summary and input into the database.  SMM price analysts are subject to a code of business ethics when reporting to their supervisors the content of any coerced or threatened communication from market participants, or any kind of induced offer that seeks to influence the outcome of an assessment. After the price is published, SMM will not make corrections or adjustments on the same day.

2.5 Pricing unit: 1%

2.6 Form of existence: in the form of a range, including 13% value-added tax

2.7 Online update: 11:30 a.m.-12: 00 p.m. on each working day (China’s legal holidays and weekends excluded)

2.8 Quoting routine

From 9:30 to 11:30 a.m. every working day, SMM will carry out the price assessment of “discount factors of metals contained in ternary battery scrap”.

2.9 Change in methodology

All markets are changeable and SMM is responsible to ensure that the pricing methodology will change in tandem with the market dynamics. Therefore, SMM will conduct regular internal reviews of the methodology based on feedbacks from industrial players.

For all potential amendments to the methodology that are substantial but not urgent, SMM will follow a formal process of external consultation. Any major changes to the methodology will be released to invite comments and suggestions from players in the industry at least 28 days before the official announcement, unless affected by emergencies and force majeure factors, such as natural disasters, wars and exchange failures.

SMM undertakes to scrutinise all comments on proposed changes in methodology but in some cases may have to carry out the changes anyway against the wishes of some market players. In addition, SMM has a formal process of methodology consultation. SMM is committed to at least one formal consultation per year on the report of the “discount factors of metals contained in ternary battery scrap”.

SMM welcomes all relevant players in the industry chain to engage with and help SMM to better serve the enterprises in the new energy industry chain.

Should you have any questions, please feel free to send your feedback to service.en@smm.cn.