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Multiple delegates on the sidelines of the conference were pessimist for lithium demand outside China in the near term amid the international slowdown in the electric vehicle (EV) market.
Lithium demand has been weak in ex-China markets so far this year, as Fastmarkets reported previously. And delegates at the conference told Fastmarkets they expect the demand weakness to persist at least for the remainder of 2024.
“Lithium demand doesn’t look bright particularly compared to the upcoming supply, especially from South America,” a broker source said.
“We have been trying to destock our battery inventories, but they are still higher than our target, which is worth two months [of output],” a battery producer source told Fastmarkets.
“In the meantime, the international original equipment manufacturers [OEMs] are also trying to destock,” the source added, lamenting a lack of support for downstream lithium demand.
Fastmarkets analysts forecast the global lithium market to be in a surplus of 13,350 tonnes of lithium carbonate equivalent (LCE) in 2024.
“Due to the significant lithium price fall over the past year and current lithium chemical prices, many investments in new lithium projects have been cut and development of existing projects have been delayed,” a lithium miner source said.
“To attract investment in mining projects, lithium chemical prices have to be above $20 per kg, but I am not sure when the lithium price can rebound to that level,” the miner source above added, signaling a lack of faith in any near-term rebound.
Fastmarkets assessed the benchmark lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea at $13.70-15.00 per kg on Monday April 29, down by 64.79% from $38.50-43.00 per kg on April 28, 2023.
Fragmentation deepened in the nickel market with a slew of ex-Chinese producers trying to wean off reliance on Chinese materials, in a bid to qualify for Inflation Reduction Act (IRA) credits, Fastmarkets heard in the conference.
Companies that have more than 25% ownership or control by a foreign entity of concern (FEOC), which includes China, will not be eligible for tax breaks available under the IRA.
While more nickel sulfate plants have been built in South Korea, a free trade partner with the US, uncertainty remains on the origin of feedstock. And this has caused price differentials in materials, with the IRA-compliant nickel sulfate costing up to $2,000 per tonne, while a bid for outbound sulfate shipments from China was heard at a discount.
“We are aiming to build an all-in-one plant which fully complies with IRA requirements,” a producer source in Korea said, claiming that their nickel sulfate is a premium one among the varying levels of materials.
“Chinese materials are cheap and who wouldn’t accept it as long as the price is workable,” a Chinese nickel sulfate producer source said, who was looking for downstream precursor clients at the conference.
Nickel sulfate is traditionally dissolved from metal but the emergence of cheaper alternative feedstock mixed hydroxide precipitate (MHP) just turned the tide. Most MHP supply is still dominated by Chinese producers, however, leaving geopolitical risks at place.
Such a wide price difference has gone some way to explaining the disarray in the nickel sulfate market, where the price range in Asia is seen widening recently. Nickel sulfate is the chemical component for precursors in EV batteries.
Fastmarkets assessed the nickel sulfate premium, cif Japan and Korea at $1,100 per tonne on April 26, up 10% from $1,000 per tonne one week before. The assessment had held steady at $1,000 per tonne since the end of December prior to the recent uptick.
Oversupply and weak downstream demand for cobalt remained the key talking point among delegates. The bearish cobalt market sentiment was driven by the continued downward movement in cobalt prices.
Fastmarkets’ daily cobalt standard grade, in-whs Rotterdam has been largely rangebound at low levels since the end of 2023. It has fallen by 3.76% to $12.80-14.25 per lb in the latest assessment on April 29 from $13-14.18 per lb on December 29, 2023.
Most delegates said they expect weak cobalt prices to stay for the short term due to increasing cobalt supplies arising from capacity additions in the Democratic Republic of the Congo (DRC) and Indonesia.
“Chinese miner CMOC‘s cobalt production guidelines for 2024 expected to reach 60,000-70,000 tonnes in 2024. With sufficient supply, most cobalt consumers are in no hurry to buy and are waiting for lower prices as they are not worried about supply issues,” a delegate told Fastmarkets on the sidelines at the conference.
“Moreover, increasing cobalt supply from mixed hydroxide precipitate (MHP) in Indonesia put further downward pressure on prices,” the same delegate added.
A weak cobalt sulfate market in China was also curbing any increase in cobalt prices. Fastmarkets assessed cobalt sulfate 20.5% Co basis, exw China at 30,500-32,000 yuan ($4,212-4,419) per tonne on April 26, compared with 32,000-32,500 yuan per tonne at the end of 2023.
“Demand for cobalt sulfate from the further downstream precursor sector remains weak. Most buyers keep pressing down cobalt sulfate prices and are unwilling to accept higher prices. Though the production schedule in the downstream precursor market has improved since March, competition has been very fierce with pricing wars, which also curbs [any rise in] cobalt sulfate prices,” a second cobalt market delegate said.
Although the short-term market outlook remains gloomy, some delegates said they expect demand to gradually recover in the third or fourth quarter with improved buying.
“After such a long period of inventory consumption, I feel that downstream buyers should increase their purchases in the third or fourth quarter of 2024. The cobalt market might get some support later this year,” a third delegate in the cobalt space said.
Graphite is gaining interest given China’s absolute dominance in both synthetic and natural graphite raw materials against the backdrop of IRA and FEOC rules, which might rule out the possibility of the majority of EVs to be compliant with the IRA subsidy after 2025.
“China’s export control policy that started in last December highlighted the graphite supply chain shortage outside of China. When we think about the longer-term picture, China’s domination throughout the graphite supply chain requires more government reactions to ensure we can have the free flow of graphite materials outside of China, [and there] is still a long way to go,” David Christensen, CEO of Australia-based graphite miner Renascor, said.
Industry participants agreed that the challenges for producers to build graphite supply chain outside China lie in the mature technology development and innovation in China over the past decade. And China continues to increase its domination by expanding facilities at a limited profit margin for some producers.
Considering China’s cost advantage, the emergence of a two-tiered pricing mechanism for anodes produced outside of China was also noted by industry participants at the event.
While many industry participants agree that there could be two-tiered pricing systems for Chinese and non-Chinese products based on the IRA rules and higher performance, the exact window for this is still unknown due to the immature supply chain structure outside of China.
Fastmarkets’ latest assessment for graphite spherical 99.95% C, 15 microns, fob China stood at $1,800-2,200 per tonne on April 25, down by 14.89% from a year earlier at $1,800-2,200 per tonne on April 27, 2023.
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