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Li battery output driving Chinese cobalt demand

05 Apr 2018 16:10 (+01:00 GMT)
Li battery output driving Chinese cobalt demand

London, 5 April (Argus) — Rising Chinese lithium-ion battery production is switching demand for cobalt to intermediates rather than concentrates and is likely to push sulphate prices up to fresh highs on tight spot supply.

Production of lithium-ion batteries in China increased by 42pc in 2017, according to data from the country's national statistics bureau.

The sharp growth in lithium-ion battery development alongside increased electric vehicle (EV) production indicates that most cobalt raw materials are going directly into the production of cobalt chemicals, such as sulphate, for use in lithium-ion battery cathodes.

China sold 804,000 pure-electric and plug-in hybrid electric vehicles in 2017, up by 67pc from 482,000 the preceding year. The country has a production target for 2018 of 1mn units. Several new battery production projects are under construction, primarily for developing batteries for EVs rather than consumer electronics devices.

Demand in China for some consumer electronics declined last year, with sales of mobile phones down by 6pc year on year.

China increased its imports of cobalt intermediates by 32pc in 2017, but cobalt ore and concentrate imports fell by the same amount. That pointed to stronger demand for semi-processed raw materials such as hydroxide for conversion into downstream chemicals.

A significant amount of this came from the Democratic Republic of Congo (DRC), where Chinese companies including China Molybdenum and Huayou Cobalt have large mining operations.

China has continued to import more cobalt intermediates this year with volumes up by 26pc year on year in January and February, official customs statistics show.

Last month, Chinese battery producer GEM signed a deal with Switzerland-based miner and trader Glencore for up to one third of its annual cobalt output in the form of hydroxide that will likely come from the Katanga copper and cobalt operation in the DRC.

Demand is likely to keep rising, putting pressure on supplies that are already running tight. A number of cobalt operations — including Managem's CTT mine in Morocco, Eurasian Resource (ERG)'s Chambishi mine in Zambia and the Sherritt and Sumitomo jointly-operated Ambatovy mine in Madagascar — are either sold out of spot material or struggling to produce enough chemical-grade metal to meet demand.

Prices for battery chemical cobalt sulphate on the domestic Chinese spot market were last assessed at Yn138,000-145,000/t ($21,886-22,996/t) on 3 April, their highest level since the assessment began in November 2009 and up by 42pc year on year.

Prices have tracked those for other cobalt products including metal and cobalt powder — a refined metal used almost exclusively for chemical applications — on tighter supply and rising demand (see chart).

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Cobalt sulphate vs cobalt powder (ex-works China)