Cobalt market sees reduced demand from new energy industry
----Interview with Li Long
Deputy General Manager
Zhuzhou DingliIndustrial Co.,Ltd.
Founded in 1991, Zhuzhou Dingli Industrial Co.,Ltd. is located in Zhuzhou City, Hunan province which is the hometown of non-ferrous metals with convenient transportation. On basis of company philosophy of “to be firmly-grounded, industry-lead, and credit-first”, the company pays great attention to science and technology and makes great efforts to focus on the research and development of high and new technology, heading for healthy and steady development of enterprise normalization, product seriation, and management talents.
Asian Metal：Thanks for accepting the interview of Asia Metal, Miss Long. Please give a brief introduction of your company.
Miss Long：Located in the hometown of non-ferrousmetals, which is Zhuzhou City, Hunan province, Zhuzhou Dingli Industrial Co.,Ltd. was established in1991, covering an area of over 10,000 square meters. We are mainly engaged in the production and research of cobalt powder. With an annual production capacity of 1,000t, our actual annual output ranges from 600-700t.
Asian Metal：As we all know, the prices of cobalt powder kept reducing from Q2 till early August, what do you think is the main reason?
Miss Long：Since March of this year, COVID-19 cases started to appear in many places in China, and the condition kept gradually getting worse later. In order to better control the risk, many regions launched strict epidemic prevention policies, which results in impeded logistics and significant reduction of cobalt powder demand. Although the spread of COVID-19 during the period may not be as widely spreaded as that in 2019, its impact on Chinese economy recorded much worse.
Asian Metal：Although COVID-19 prevention condition became much better from June, the prices of cobalt powder still kept reducing. What do you think is the reason? Recently, the prices of cobalt powder stayed relatively stable, what is your prediction for the price trend in Q4?
Miss Long：Firstly, although COVID-19 prevention condition has improved and the demand of new energy industry is expected to improve as well, the downstream demand has not been fully recovered and it will take time. In addition, in June and July, cobalt powder consumers mainly consumed inventories without plans to purchase in large quantities. As for the price, we originally reckoned that the prices of cobalt powder could bottom out at RMB400/kg (USD59.8/kg) in early June. However, the prices reduced to the levels lower than RMB350/kg (USD48.2/kg) at the beginning of August already, which brought a big blow to our confidence. In the second week of August, the prices started to go up marginally, and got stable afterwards. Based on the current orders, we estimate that the mainstream prices of cobalt powder in Q4 would keep steady or go down slightly.
Asian metal：Now the prices of cobalt salts stay at high levels, how do you solve the problem of high raw material prices?
Miss Long：Our primary goal is to reduce inventory on the premise of ensuring the normal consumption of clients. Secondly, we purchase and supply in batches. At present, our consumers only purchase spot goods instead of futures due to their bearish attitudes towards the price trend. However, as I said, we prefer reduce inventory now, which is contradictory with consumers’ purchase preference. To balance this situation, we could only purchase raw materials in batches and supply cobalt powder to customers in batches as well. Thirdly, for big orders more than 3t, we could only accept the orders after we lock the purchase prices of raw materials so as to decrease risks. And for orders less than 3t, we mainly sell our stocks. Finally, we could only reduce profit to ensure sales and maintain relationship with clients under such high prices of cobalt salts.
Asian metal：Cobalt powder market saw soft demand in Q2 and Q3 of this year. What do you think of the demand of cobalt powder in Q4?
Miss Long：Dragged by COVID-19, the downstream demand in Q2 and Q3 remained soft. According to the experience of previous years, Q4 should be the peak season of cemented carbide industry, but due to the current special condition, we anticipate that the demand in Q4 would remain stable compared with that in Q3.
Asian metal：When it comes to cobalt market, people always talks about new energy industry such as new energy vehicles. How do you think of the proportion of new energy industry take in China's total cobalt demand?
Miss Long：As far as I know, in 2018, China's demand for cobalt from new energy industry accounted for about 70%. However, in the past two years, LFP industry developed rapidly, of which the growth rate has exceeded that of LNMCO. In addition, many enterprises now tend to use low cobalt or cobalt-free precursors and LNCMO materials. Therefore, it is expected that the current demand for cobalt from new energy industry has dropped to roughly 50-60%.
Asian metal：You mentioned that people prefer to use low cobalt and cobalt-free precursors. What do you think of this phenomenon?
Miss Long：It's normal. China's cobalt raw material supply mainly relies on import, and the prices from international suppliers fluctuate greatly, which is pretty disadvantageous to the development of the new energy industry. This might be the main reason affecting the relative decline of cobalt consumption volume. Moreover, the performance of LFP battery stays far more stable than that of LNCMO battery, which is also an important reason why many new energy vehicle producers adopt LFP instead of LNCMO. Of course, it will take time for LFP to replace LNCMO completely, so I don't think it will happen in the coming two years, but it may happen later.
Asian metal：What’s your prediction for the development prospect of cobalt industry in the coming three years?
Miss Long：Demand for cobalt from cemented carbide industry stays relatively stable and the development prospect of cobalt mainly depends on new energy industry. At present, most of the countries in the world focus on the development of new energy vehicles. As a result, we hold optimistic attitude towards the development of new energy and cobalt industry in the coming 2-3years. It is expected that demand for cobalt from the new energy industry will increase year by year in the following 2-3 years.
Asian metal：Thank you again for accepting our interview. We wish ZhuzhouDingli Industrial Co., Ltd. a prosperous business.
