BATTERY & SUPPLY CHAIN CONF: Six things we learned in Qiandaohu

Fastmarkets reporters present six main takeaways from the Lithium-ion Battery & Material Supply Chain conference hosted by Shanghai Xinluo Network Technology in Qiandaohu, China, on July 11-12.

180,000 yuan per tonne for cobalt metal a ‘good price to restock’
Chinese cobalt metal buys should top up inventories when prices in China drop to 180,000 yuan per tonne ($10.52 per lb, less China-VAT), traders told Fastmarkets on the sidelines of the conference.

Fastmarkets assessed the cobalt 99.8% Co min, exw China price at 210,000-230,000 yuan per tonne on July 12, down nearly 68% from a multi-year high of 675,000-690,000 yuan per tonne in April 2018. The latest price is also close to the lowest level in almost three years. The domestic Chinese cobalt metal price fell to 180,000-205,100 yuan per tonne in June 2016, according to Fastmarkets historical data. 

“We’ve witnessed some speculative buying on local futures platforms, and those in the spot market might follow shortly,” a trader said, adding that he is likely to top up inventories gradually in the near term.

But even as the current low price boosts some restocking, other market participants doubted such buying will cap the downtrend immediately or even revive the price, citing oversupply in the cobalt market.

“The price has dropped to low levels we had seen before mid-2016. In a normal case, this be mean a good opportunity to add some positions,” a second trader said. “However, we also need to note the supply difference between now and three years ago.”

Cobalt-free batteries won’t be mainstream yet
There were heated discussions at the conference as to whether cobalt-free batteries will power electric vehicles (EVs) soon, following recent news that SVOLT, a local Chinese lithium-ion battery producer, will develop cobalt-free EV batteries.

Some conference delegates have taken a cautious stance on the potential development in battery chemistries.

Professor Hu Guorong, from Central South University in China, advised battery producers to develop cobalt-free battery only when the technology is mature enough to maintain a stable material structure for batteries without cobalt.

“There are still risks in applying cobalt-free battery to EVs,” Hu said. “We need to develop cobalt-free battery in accordance to technology developments.”

In addition, some conference delegates told Fastmarkets there is no point in battery producers prioritizing the development in cobalt-free batteries given the low cobalt price now and forecast in upcoming years.

Fastmarkets assessed the cobalt standard grade, in-whs Rotterdam benchmark price at $12.65-13.10 per lb on Friday July 12, the lowest price since October 2016.

Meanwhile, given an increasingly significant cobalt supply surplus, which Fastmarkets’ battery research team forecasts at 16,000 tonnes in 2020, consensus is the cobalt price will be bogged down until the surplus narrows extensively. The research team also forecast the average cobalt benchmark price for the second half year of 2019 at $12-13 per lb, and that for 2020 at $12.40 per lb.

“There won’t have a lot of battery producers following [SVOLT] when the cobalt price remains low,” a precursor materials producer said.

LFP, LMO battery to maintain market share in EV sector
Despite a broad preference among EV makers for nickel-cobalt-manganese (NCM) lithium-ion batteries, which have higher driving range and energy density, lithium iron phosphate (LFP) and lithium-ion manganese oxide (LMO) batteries will maintain a certain market share, according to Liu Yanlong from China Industrial Association of Power Sources.

China’s EV subsidy policy is likely to be phased out from 2020, and some EV makers have turned back to safe and lower cost batteries, such as LFP and LMO battery, Liu told the delegates, adding that safety would always be the priority for EV makers even when they pursue high driving ranges.

Other conference delegates also agreed with Liu, adding consumers’ needs will lead to a diversity of batteries.

“[Some EV makers] have stuck with LMO batteries, which are sufficient to serve urban transport [needs],” a trader said.

Spherical graphite price underpinned by steady demand
It is difficult to completely substitute spherical graphite due to its relative better lithium-storage capacity as a lithium-ion battery anode material, a China-based anode producer told Fastmarkets on the sidelines of the conference. This means graphite demand from the downstream battery sector and spot prices are like to remain stable.

Fastmarkets assessed the graphite spherical 99.95% C, 15 microns, fob China, price at $2,800-2,900 per tonne on Thursday, unchanged since May 24, 2018.

Spherical graphite is traditionally used to produce graphite anode material, made from flake graphite and used in lithium-ion batteries, due to its excellent theoretical lithium-storage capacity and electrical conductivity and better crystallinity, according to market sources. Spherical graphite is mostly used in carbon anodes despite the emergence of silicon-based anodes as a potential substitute.

On the supply side, the overhanging threat of restricted production due to environmental concerns will support prices in the near term, Fastmarkets learned. China is a major spherical graphite supplier. Environmental inspections in production hubs, such as Shandong and Heilongjiang province, remain the key supply driver underpinning spherical graphite prices in the second quarter of this year, according to conference delegates.

But flake graphite prices are under pressure
The flake graphite price has been under pressure on weak demand in the downstream refractory industry despite healthy demand from the emerging battery anode sector.

Demand for flake graphite from the anode sector has been supported by rising anode production capacity in China. Shanshan Technology, one large anode materials producer in China, is building the first phase of a lithium-ion anode line in Inner Mongolia with capacity to produce 40,000 tonnes per year of anode. The line will start operations in the third quarter of this year, Xie Qiusheng, senior engineer from the Shanghai Shanshan told delegates.

Yet demand from the traditional downstream consumer – aluminum-magnesium-carbon (al-mg-c) brick used as a refractory material – is falling due to reduced output of al-mg-c brick in China following environmental scrutiny. This drop in demand has put flake graphite prices under downward pressure.

According to data from China’s Association of Refractories, China produced around 260,600 tonnes of magnesium-brick in the first five months of 2019, down by 27.56% from the corresponding period of 2018.

Fastmarkets’ graphite flake 94% C, -100 mesh, fob China price averaged $623 per tonne so far this year, down by 5% from $655 per tonne in the corresponding period of last year.

Consumers’ production lines lead to preference for natural graphite, synthetic graphite
The debate on whether natural or synthetic graphite performs better in lithium-ion battery anodes raged on at the conference.

“In 2012, needle-coke started to be [produced into synthetic graphite to be] used in battery anode, and the application has been expanding quickly since 2016 because needle-coke is easier to graphitize at higher temperatures,” Peng Li, chief engineer from Shandong Yida New Materials, told delegates during a panel discussion at the conference. Needle-coke has attracted the attention of the lithium-ion industry because of its better electrical conductivity and longer cycle lifetime due to its graphited microcrystalline structure and needle texture.

But other market participants disagree, saying: “Compared with synthetic graphite, natural graphite has a better rate of charge and more stable chemistry structure,” Xie Qiusheng told the conference delegates.

Ultimately, downstream consumers’ buying habits and their production lines will determine which will emerge as the market leader, a China-based producer told Fastmarkets on the sidelines of the conference said, citing both synthetic and natural graphite as being used by leading battery producers in the world.

Carrie Shi in Beijing contributed to this article.