Battery boom warrants evolution of cobalt pricing mechanisms
Cobalt hydroxide and cobalt sulfate account for a growing portion of the cobalt market, which reflects growth - and forecasts for future growth - in EV demand. While cobalt metal prices have traditionally dictated prices along the cobalt supply chain, consumption from the battery sector accounts for a growing proportion of cobalt end use, which may bring about a change.
“If we say the cobalt market is about 120,000 tonnes, maybe 25% of that is cobalt metal; but when we talk about the cobalt market as a whole, in fact it’s more about cobalt salts,” Sam Wang, product manager at Manatrade, told delegates during a panel discussion.
“Metal prices cannot account for future demand [for cobalt] from the battery space. Cobalt hydroxide prices can reflect battery demand in the future,” Forrest Deng, general manager of China Molybdenum’s industry research department, said.
Fastmarkets launched two reference prices for cobalt hydroxide in February this year.
Lithium price mechanism to smooth negotiations
A transparent lithium price mechanism would smooth negotiations and help forge longstanding relationships between producers and consumers, Lithium companies and analysts said at the conference.
"We have been supporting Fastmarkets' lithium prices because it makes negotiations easier and provides the market with the transparency needed," Pertti Lamberg, the chief executive officer of Finnish lithium company Keliber, said.
Price volatility to persist while market participants retain negative price outlook
The rapid supply response in China and Australia over the past two years has increased dramatically the number of lithium units in the global lithium market, Keliber, Savannah Resources and lithium consultancy Ilimarkets agreed during a panel at the conference.
On the sidelines of the conference, lithium producers told Fastmarkets that the large volumes of lithium chemicals produced in China were a major cause of the fall in prices. They expect lower prices before the end of 2019 due to supply exceeding demand for lithium chemical compounds in the battery industry.
Fastmarkets assessed the lithium carbonate, 99.5% Li2CO3 min, battery grade, exw domestic China, spot price at 56,000-61,000 yuan ($7,859-8,560) per tonne on Thursday 26.
Meanwhile, the Fastmarkets lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade, ex-works, spot price was 60,000-68,000 yuan per tonne on Thursday.
Changes in supply and demand of lithium compounds will contribute to the volatility in lithium prices in the coming years, market participants across the supply chain said at the conference.
Strong growth in Europe’s battery sector
The production of batteries in Europe is set to more than double to 1,000GWh hours by 2025 from 2015, according to Eurobat, the Association of European Automotive & Industrial Battery Manufacturers.
Lithium-ion batteries will overtake lead-acid batteries in terms of value for the first time but lead-acid batteries will retain their traditional position as the principal source of battery capacity.
Batter makers are being attracted to Central Europe by low labor costs and access to the German car market.
Upstream, production of graphite flake is also set to increase. Leading Edge Materials plans to start production from its Woxna facility in Sweden where it plans to process spherical graphite for the battery market.
'Reputational risk' from anode grade graphite
The processing of graphite flake into anode grade material poses a reputational risk to buyers, Adam Panayi, managing director of battery analyst RHO Motion, said.
Most of the processing takes place in China where it has been linked to environmental damage.
Companies that manufacture car parts must manage their exposure to the risk of their products’ reputation being tarnished by non-sustainable practices.
“[They] will attempt to source from the most reputable companies there are,” Panayi said. “This may limit supply choices over time, which may affect prices.”
Battery demand could split manganese flake market
The expected boom in electric vehicles will drive up demand for battery raw materials once current demand for materials has exceeded supply. This point should be reached in 2023, according to Goran Djukanovic, an analyst at Aluminium Insider.
With lithium-ion batteries expected to remain the dominant form of battery, demand for manganese flake is set to soar.
While Djukanovic does not foresee any issues in the volume of supple, prices for battery-grade material could rise “exponentially,” he said. This upward price pressure could force the battery-grade graphite flake market to split away from the rest of the market, which is predominantly driven by the steel industry.
Fastmarkets rounds up six key takeaways from its first Battery Materials Europe conference in Amsterdam, which took place on September 26-27.