Concerns over a looming lithium price fall key focus at Antaike’s nickel and cobalt conference

Five key takeaways from the annual nickel and cobalt conference hosted by Chinese information provider Antaike over November 2-4 in Changzhou, China

Nickel and cobalt market participants voiced their views and gave their outlook after a year of volatility and uncertainty. Fastmarkets summarizes below five key takeaways from the sidelines of the conference.

  • Concerns about weakness in lithium market
  • Limited interest in cobalt hydroxide
  • Brand announcement for nickel briquettes imminent
  • Long-term supply discussions for nickel cathode
  • China’s nickel sulfate demand robust

1. Concerns about weakness in lithium market in 2023

Despite the bullishness in the lithium market so far this year, which market participants expect to continue until the end of 2022, delegates expressed concern on the sidelines of the conference about a looming price fall.

“It’s a cyclical thing. No price can stay on the uptrend forever and lithium prices may see a sharp fall in 2023,” a trader said.

Fastmarkets’ research team forecasts demand of 698,900 tonnes of lithium carbonate equivalent (LCE) for 2022, increasing to 884,400 tonnes in the following year. Supply will increase from 679,400 tonnes of LCE in 2022 to 895,900 tonnes in 2023, leaving the market in a slight surplus.

“In 2023, multiple spodumene projects will come online, like the Wodgina spodumene mine. This will add significantly to spodumene supply,” a lithium producer source said.

“Lithium salts production will also be ramped up, which will to a great extent ease the tightness seen currently in the lithium market, leading to a decrease in lithium prices,” the producer source also said.

Attendees were also concerned about the potential impact on demand for electric vehicles (EV) and on upstream battery materials, including lithium, of the Chinese government’s decision to cut completely its buyer subsidy for EVs.

“Due to the removal of [the subsidy] and the gloomy macroeconomic environment, sales of EVs next year might be impacted. If demand for EVs sees a substantial retreat, lithium prices will also fall quickly, probably from April, the typically weak season for lithium prices,” a cathode producer source said.

2. Limited interest in negotiations for cobalt hydroxide on long-term contracts

The annual long-term contract negotiations for cobalt hydroxide have been sluggish during the current traditional mating season – China’s weak cobalt market this year and a gloomy outlook in 2023 have curbed interest.

Thin demand and high cobalt hydroxide prices have caused domestic producers to suffer “losses for most of 2022”, a cathode producer source said.

“In terms of cobalt tetroxide, I don’t expect any significant improvement in demand from the consumer electronics sector in 2023. Demand will still be weak,” a cobalt producer source said.

According to Fastmarkets’ research team, total cobalt supply will be 206,000 tonnes in 2023, up by 26,000 tonnes from 180,000 tonnes in 2022, while cobalt demand will rise by 17,000 tonnes to 194,000 tonnes from 177,000 tonnes. This would put the cobalt market in a surplus of 12,000 tonnes in 2023.

Market participants also see nickel-cobalt mixed hydroxide precipitate (MHP) as viable competitor product to cobalt hydroxide, especially given the ramp-up in production in Indonesia.

“We have signed long-term contract for MHP from which we will also get cobalt hydroxide supply,” a second cathode producer source said. “With the expected weak cobalt market in 2023, we may reduce the portion of long-term supply of cobalt hydroxide. Spot purchases can largely meet the rest of our demand in 2023.”

“We are in no hurry to start negotiations of long-term cobalt hydroxide contract now,” the cobalt producer source added. “Due to the strike at Transnet in South Africa, deliveries of our cobalt hydroxide orders are experiencing delays. So we will still receive deliveries under the 2022 long-term contracts during the first quarter in 2023.”

China imported 260,128 tonnes of cobalt intermediates during the first nine months of 2022, up by 32,627 tonnes, or 14.31%, from 227,501 tonnes a year earlier, according to the country’s custom data.

3. SHFE could announce brands for nickel briquettes delivery soon – sources

The Shanghai Futures Exchange could reveal the brands of nickel briquettes accepted for delivery onto the exchange later this month, several sources told Fastmarkets on the sidelines of the conference.

The discussion about delivery is at the final stage and the list of deliverable brand names will be released soon, delegates claimed.

“The final decision on deliverable brands of nickel briquettes will be out soon, and I heard there will be four brands to be allowed for deliveries [into the SHFE],” one attendee said.

“The list [of deliverable brands] will be out in November at its earliest but I heard three brands of nickel briquette will be allowed for delivery,” another attendee added.

The SHFE announced in May 2020 the approval for delivery of nickel briquette from October 16 for contracts for November delivery onward, without providing further details.

4. 2023 long-term contract supply talks in progress; eyes on LME’s final decision on Russian metal

The long-term contract supply negotiations for nickel cathode in 2023 have started but there is a big price gap between sellers and buyers, market participants at the conference said.

“The talk has started… the offer by Nornickel is much higher than I expected,” one attendee said, without specifying the offer he received. “I will wait, and I’m not in hurry to sign it.”

Market sentiment is cautious before the London Metal Exchange issues its final decision on the acceptability of Russia-origin material.

“Chinese market participants expect more inflow of Russian nickel next year, and they are not in hurry to ink any deals while they are waiting for the LME’s final decision,” a second trader at the conference said.

There is speculation that some parties would prefer to sign long-term contacts based on the Shanghai Futures Exchange nickel price rather than LME price after the latter’s nickel drama in March, which led to a trading suspension.

5. China’s nickel sulfate demand robust; output to grow in 2023

Chinese spot demand for nickel sulfate is strong and its low spot availability is pushing the price higher, prompting expectations that domestic nickel sulfate output will grow in 2023.

“Spot supply of nickel sulfate is tight now, and the price is moving higher,” a buyer source said. “With increased supply of feedstocks from Indonesia, China’s nickel sulfate output will increase significantly next year.”

“Domestic spot supply of nickel sulfate will increase next year, with more output expected, and nickel matte will be used more as the feedstock for domestic nickel sulfate production,” a supplier said.

After Tsingshan Holding Group announced a deal to supply nickel matte to Huayou Cobalt and CNGR Advanced Material - demand has boomed thanks to the electric vehicle (EV) revolution - the material has been closely watched.

China imported 106,900 tonnes of nickel matte during the first nine months of 2022, up by 592.26% year on year, according to customs data.

Nickel MHP and nickel matte have been the two major feedstocks for nickel sulfate production in China thanks to increased supply of both products from Indonesia. The appeal of nickel briquette has faded given its lack of price competitiveness over the former two products.

Fastmarkets launched a nickel MHP price on October 28 in response to fast-growing market attention.

Fastmarkets calculated the nickel mixed-hydroxide-precipitate payable indicator, % London Metal Exchange, cif China, Japan and Korea at 78-81% on November 4, up from 75-78% on October 28.

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