BATTERY MATERIALS EUROPE: Seven talking points ahead of the battery supply chain meet in Amsterdam

Fastmarkets outlines some of the key topics likely to dominate discussions when participants of the battery raw materials and electric vehicle supply chain gathers in Amsterdam this week.

Are cobalt buyers serious about booking early for 2020?
Some discussions for cobalt supply agreements in 2020 started almost as soon as Glencore announced it would close its Mutanda mine at the end of the year, in doing so, changing the supply picture for next year. Fixed-price business for cobalt metal has been concluded above $18 per lb and into the low $20s (compared with standard grade cobalt spot prices in the mid to high $17s) for 2020 delivery. But while other discussions are in progress, some market participants have indicated a preference to hold out for LME Week, taking place from October 28, by which time they expect a clearer picture on the strength of the recent rally to have emerged. 

Can cobalt prices continue to run higher?
The benchmark cobalt standard grade in-whs Rotterdam price stands 44% higher than at the end of July, when it bottomed out at 34-month lows. After an initial recovery, the gains have been slower in September but are nonetheless underpinned by a renewed uptick in Chinese metal and sulfate demand and prices. The price staged a short-lived rally at the end of the first quarter thanks to trader restocking but, in the absence of a deeper change in fundamentals and cautiousness in China, it soon faltered.

This time around, the removal of 25,000 tonnes per year of cobalt produced at Mutanda from the market seems to have given necessary support to higher prices although clarity on the strength of consumer demand, which on the battery side is still cautious, will dictate whether the price holds onto its gains.

Are lithium spot prices in China close to a bottom?
Oversupply in the lithium market has pushed down the lithium spot price for most of 2019. Fastmarkets’ battery grade lithium carbonate spot price in China is already trading as low as 56,000-61,000 yuan ($7,889-8,593) per tonne as of September 19. This compares with an assessed range of 75,000-83,000 yuan per tonne at the start of the year. 

The battery grade lithium hydroxide spot price in China was assessed at 60,000-68,000 yuan per tonne on the same day. The price started the year at 99,000-109,000 yuan per tonne.

And market participants in China remain pessimistic on the price outlook for the remainder of the year due to lower-than-expected demand and an excess of material in the market.

Will Chinese spot prices affect the global contract prices?
Lower spot prices in China for battery and non-battery grade lithium compounds have been pushing down contract prices in the rest of the world, together with prices reported by most lithium producers in their quarterly results this year. New contract prices for big consumers for the following year point to prices for battery grade lithium carbonate and hydroxide at or below $10,000 per tonne, underlining the oversupply of lithium compounds in the market and a bleaker view of future lithium prices.

Will battery makers favor natural or synthetic graphite?
Graphite producers expect demand from lithium-ion batteries will be the main driving force of growth for the graphite sector over the next 10 years. Producers will be watching carefully for signals of buyers favoring synthetic or natural material. Either way, demand has been forecast to grow strongly for both types of material thanks to the expansion of the lithium-ion battery sector, according graphite and carbon products trader ProGraphite.

The forecast demand uptick could erode the current flake graphite oversupply, while other projects are coming on stream to meet the expected demand.

When could demand from the batteries sector support manganese ore prices?
The major consumer of manganese ore continues to be the steel sector. But market participants are starting to wonder whether the growth in the batteries sector could provide support to the manganese ore price as battery composition develops due to the ore’s use in some battery chemistries.

Falling sentiment in the steel market has revealed oversupply in the manganese ore market. In turn, the volatile price for 37% mangnaese ore cif Tianjin has dropped to $4.82 per dry metric tonne unit on September 20 a fall of 14% since July 19 when started its recent downtrend.

This has helped cut costs for batteries makers but has also started to choke off imports into China of material from high-cost producers. Some market participants believe supply needs to tighten further if the market is going to rebalance.

Is the LME three-month nickel price justified?
The LME three-month nickel price has risen by 79% since the start of 2019, peaking at $18,850 per tonne on August 30 after starting the year at $10,530 per tonne. It is now trading consistently above $17,000 per tonne.

This rally took place at a time of unprecedented weakness in physical demand, leading to a consensus that the increase was technically driven and divorced from physical market fundamentals.

European premiums remain suppressed while Asian premiums have swung to a discount, all pointing to weak demand. But with LME stocks at a seven-year low, down 25% at 153,106 tonnes across the year, and with only 41% of these stocks deliverable, the physical market looks to be tightening at a time when stainless steel demand continues to rise and the advent of EV demand for nickel is on the horizon.

Delegates will be watching to see if these price-supportive factors could trigger a fresh rally.