BENCHMARK SOURCE – 20 Jul 2023   Prices of critical battery materials such as lithium, cobalt, nickel and graphite, were under pressure in the first six months of this year as a slowdown in China hit downstream demand and new supplies continued to enter the market. 

Critical battery material prices declined between 20% and 40% in the first half of 2023 at a time when cathode and anode makers continued to destock existing inventories or remained cautious with new orders and producers continued to pile up supplies amid an uncertain demand scenario.

“Following a year of bumper cell production in China in 2022, the first half of 2023 saw a notable softening for battery raw materials in China, with these markets slowing down for the first time in nearly two years as downstream players took a breath in regards to feedstock purchasing whilst working through stockpiled cell inventories,” said Daisy Jennings-Gray, analyst at Benchmark.

Demand for electric vehicles in China took a hit at the start of the year following the discontinuation of a decade old New Energy Vehicle subsidy and the incoming Spring Festival. Electric vehicle sales remained weak but picked up pace in February after a Tesla-induced price war that spurred local rivals to offer steep discounts as well. In late June China extended the sales tax break for electric vehicles until 2027.

The battery material price declines also came at a time as the US and Europe moved ahead with ambitious plans to build their own critical minerals supply chains to responsibly source battery materials and challenge China’s mid and downstream dominance by the end of the decade. 

According to Benchmark data, this year China alone is forecast to refine 62.5% of the world’s lithium supplies in 2023, 76% of cobalt, mine 65% of the world’s natural graphite and produce 72.5% of synthetic graphite.

Battery grade lithium carbonate and lithium hydroxide prices in China had already fallen 64% and 56% respectively in the first four months of the year, slowing down the two-year rally for the critical battery material. 

Prices however recovered some ground in early May as cathode and cell makers accelerated orders despite only a moderate recovery in downstream demand. Still lithium carbonate and lithium hydroxide prices were down 40% and 42.2% overall in the first six months of 2023 data from Benchmark’s Lithium Price Assessment shows.

Cell makers started the year with high inventories spurring cathode makers to destock and make limited chemical purchases leading to an inventory build up with lithium producers and a fall in prices. Lithium traders also held back from engaging in market activity, as they waited to see if prices move lower.

Cobalt sulphate and cobalt hydroxide prices fell 21.2% and 30.3% in the first six months of 2023. Cobalt metal prices have declined 51% since peaking in April last year.

In February the industry had speculated that cobalt metal prices had neared the floor but limited demand from the electric vehicle and the consumer electronics sector stoked negative sentiments and drove prices further down.

 

Link: https://source.benchmarkminerals.com/article/why-battery-material-prices-slumped-under-pressure-in-the-first-half-of-2023