Fastmarkets’ price assessment for cobalt sulfate 20.5% Co basis exw China
, dropped to 47,000-49,000 yuan per tonne on Wednesday March 18, down 5.8% from 50,000-52,000 yuan per tonne last Friday. The battery raw materials prices have fell 16.5% in less than one month.
With a general bearish outlook on EV production and sales growth in China this year, sentiment was further dampened by the likelihood that the 2019-nCoV situation outside China is likely to inhibit projected growth in EV production in Europe and the United States.
After the total number of confirmed coronavirus infections in the US quickly climbed above 6,000 on Tuesday, Tesla’s car factory in Fremont, California, was categorized as non-essential by the local sheriff and is likely to only maintain minimal operations in the short term.
Market sources said there was also likely to be a reduction in demand for nickel-cobalt-aluminium (NCA) cathode material if Tesla’s Fremont plant stops production, and told Fastmarkets that demand for cathode materials from Japan, where the majority of NCA batteries are produced, remains healthy at the moment.
On the other side of the Atlantic, European automakers have also been forced to halt operations
due to the rapid spread of 2019-nCoV across the continent.
“[Since] many European car makers shut their production, all [EV] projects should be pushing back,” a cobalt producer said.
“[Therefore,] the anticipated surge of cobalt demand [in Europe] should be shifted to a later phrase,” he added.
If EV production growth slows in Europe, it will result in less demand for batteries produced in South Korea and Japan, which will ultimately affect the demand for precursor materials produced in China, according to a Chinese precursor materials producer.
Panic rooted in the market when participants realized the EV production in China may not even be able to maintain the same size in 2020 as it did last year after coronavirus hit the consumption in local market and is likely to weigh on appetites for EV in the future.
“The installed capacity for EV batteries in China was only [slightly] over 3 gigawatt hours (GWh) in the first two months this year, and we might be able to achieve 2-to-3GWh in March,” a second precursor materials producer said.
“It is not looking good. Last year, the installed capacity for EV batteries was more than 60GWh,” the producer source added.
Sporadic panic selling was heard this week, with consumers reluctant to restock in anticipation that the price might fall further and producers hesitant about selling a lot of cheap cargoes on squeezed margins.
“Some producers would sell at lower prices due to some financial constraints, but they are not willing to destock a lot,” a second cobalt producer said. “The more they sell, the more loss they would have.
“For now the stand-off would continue for large tonnage deal,” he added.
“No matter how low the payables sulfate producers obtained in late December for cobalt hydroxide purchases, current sulfate sales prices are much lower than the production costs,” a third cobalt producer said.
Fastmarkets’ assessment of the cobalt hydroxide payable indicator
fell to 65-68% against its standard-grade cobalt price on March 18, down from 67-69% last week and down for the second week in a row. Prior to the current downturn, the payable indicator spiked at 67-69.5% between late February and early March having recovered from a five-month low of 61.5-62% in late December.