TECH & ELECTRONICS: Track the downstream impact of Covid-19

The spread of the Covid-19 virus is causing disruption to immediate supply chains and future demand forecasts across the technology and consumer electronics sector.

Since the outbreak gathered pace in January 2020, companies including Apple and Samsung have closed plants, shifted production, and in some cases, revised revenue forecasts. The far-reaching effects of the virus on the global economy also mean the demand profile for some minor metals is changing.

Here, Fastmarkets summarizes key company announcements that affect the technology supply chain, and new measures to combat the effects of the virus, as well as their impact on the high-tech raw materials markets.

This article will be updated when new announcements are made, and new developments take place.

Impact on raw materials:

Prior to the virus outbreak, industry sources expected a 4-5% increase in cobalt demand in China in 2020 from the smartphone sector, due to the anticipated take-off of the fifth generation (5G) network.

Now, market participants have told Fastmarkets the best scenario is that the smartphone sector will maintain the same level of demand for cobalt as it did last year.

Prices for cobalt tetroxide, which is used in the production of lithium cobalt oxide batteries used in consumer electronics, initially found support from post-Lunar New Year restocking, but have since taken a hit from sales pressure and a weakening demand outlook.

Fastmarkets’ price assessment for cobalt tetroxide, 72.6% Co min, delivered China stood at 210,000-220,000 yuan ($29,600-31,000) per tonne at the beginning of March, but had fallen to 170,000-175,000 yuan per tonne by May 1, a drop of 19.7%.

Cobalt hydroxide payables have performed similarly, reaching highs of 67-69.5% of the metal price in late February. Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China stood at 61-64% of the standard-grade cobalt price (low-end), as of May 1.

Germanium has shown an increase in demand in the wake of the coronavirus outbreak, mainly for use in infrared lenses.

The metal could also benefit from a recent incentive from the Yunnan government for subsidized loan interest for money borrowed to stockpile non-ferrous metals including germanium.

Some traders reported more inquiries than in previous weeks following the stockpiling announcement, although offer prices have not increased.

Despite the rise in demand, market participants see a substantial increase in germanium consumption - and support to germanium prices - as unlikely, due to adequate supply.

Fastmarkets’ weekly price assessment for germanium 99.999% Ge min, in-whs China was 7,000 -7,600 yuan ($1,007-1,093) on April 29, unchanged since February 19.

The launch of the 5G iPhone in September was expected to boost demand for indium tin oxide, but the coronavirus pandemic has forced a supply chain slowdown that may delay further expansion of 5G and could hit demand for indium in the short term.

That said, companies such as Samsung have forecasted demand for 5G smartphones to rise compared with last year, even if the smartphone market is showing signs of contracting. Indium prices did not come under pressure in February or March,

For the time being, segments such as wearables - especially smart watches, smart TVs and monitors are offsetting the decline in demand for smartphones at high-tech companies such as an Apple and Samsung.

Indium prices were firm on February on transport restraints in China and limited availability but the spot limited demand started to weigh on the Chinese market from March 18 and prices have fallen by 5.5% since then.

Fastmarkets’ latest price assessment for indium 99.99%, exw China was 890-920 yuan per kg on April 29, unchanged week on week but under pressure in a quiet trading environment.

The development of the high-speed 5G network was expected to support gallium demand this year, especially for gallium arsenide semi-conductors and gallium nitride semi-conductors. As above, disruptions in the supply chain are likely to reduce or at least delay the extra demand expected, sources say.

It is possible that consumer electronics companies will start using chargers that use new gallium nitride technology to replace silicon. This transition could also be postponed, as the new technology is still more costly to produce than silicon and within the current global situation, industry can lack of incentives to switch over, sources told Fastmarkets.

In the short term, even if demand was not set to rise as predicted before the pandemic, the gallium market in China was buoyed by reduced supply during March yet remained static in April.

Fastmarkets’ assessment for gallium 99.99% Ga min, in-whs China stood at 1,000-1,050 yuan per kg on April 29 unchanged from the previous week.

The rollout of the 5G network in China was set to support demand for battery-grade lithium in 2020, but the coronavirus outbreak has hit the demand outlook for smartphones and consumer electronics as well as for EVs, and lithium cobalt oxide material producers have reported a reduction in orders.

During the first quarter of 2020, virus containment measures implemented in China disrupted production lines and hit demand for battery-grade lithium. This is adding to already weak fundamentals: lithium prices have been on a downward trend since the beginning of the year in an already weak price environment.

Fastmarkets’ price assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot price range exw domestic China settled at 42,500-45,000 yuan per tonne on April 30. This was down just shy of 9% from the beginning of January.

Stainless steel:
The stainless steel market remained subdued at the beginning of May even though most mills in Europe have restarted following coronavirus-related shutdowns.

Despite these restarts, production rates were significantly reduced in response to heavily subdued demand, which is expected to be the dominant market theme going forward.

The key automotive and white goods sectors have seen widespread shutdowns and, while factories and carmakers are beginning to start up again from May, the impact on stainless demand will be substantial and prolonged, and not offset by better performance in the medical equipment and food packaging/processing industries.

Alloy components continue to exert considerable influence on stainless steel markets, however, with losses in the nickel market in particular being reflected in recent stainless steel prices.

Fastmarkets’ price assessment for stainless steel cold-rolled sheet, 2mm, grade 304, transaction domestic, delivered North Europe was €2,000-2,060 ($2,185-2,250) per tonne on May 1, stable week on week but down from €2,090-2,105 per tonne on April 17.

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