Domestic Cobalt Prices from Local Price Prices

Recently, some third-party quotation institutions have risen in the price of cobalt, in particular, a number of third-party institutions on July 10, the price increase range of 2 % -5 %.

The cost of raw materials is higher, and manufacturers are selling hard. At present, the cost of manufacturers is high: the stock of low-priced raw materials is digested in large quantities in the early stages, and high-priced raw materials enter the domestic market. The cost of raw materials gradually increases the cost of cobalt. According to our model, under the 4-5 month raw material transportation and production cycle assumption, the cash cost is in the range of 52-550,000 tons, so even if the downstream demand is weak and the price is depressed, the producer is mostly performing as a price.

Traders expect marginal improvement. Most recent traders have either sold at prices of around half a million tons, digested or purchased at lower prices than half a million tons in the previous period. The producer's cost inventory of cobalt is in a lower position, less than half a month or even a week, and traders have low prices. Stock or significant reductions. In the background of "industrial chain inventory is low + manufacturers are reluctant to sell high prices", traders 'expectations of prices have been marginally improved.

"Manufacturers are reluctant to sell firm prices + traders are expected to improve" "local price increases." As a result, producers are reluctant to sell high prices, traders are expected to have a marginal improvement, together with a rebound in the price of cobalt trading, and the subsequent rise in the price of cobalt by some third-party quotation institutions. It is particularly noteworthy that: Local price increases mostly occur below the cost support range of 52-550,000 tonnes/ton manufacturers. For example, the quotations range from 488,510,000 / 488,510,000 / 505,515,000 / 495.51 million. Therefore, we judge, as the market further consumption of low traders inventory, domestic producers more explicit willingness to back up prices, "local price increases" bode well for domestic prices.

When entering summer break overseas, MB cobalt prices will be reduced or narrowed. The overseas market has entered the summer break, the transaction is further light, MB cobalt prices have continued to reduce after the recent decline, as the transaction shrink, or gradually narrowed. MB price support level or at 37 US dollars per pound, the logic is that the cobalt industry supply pattern is highly concentrated. In order to ensure that the larger intermediate raw material market profits and long orders are successfully implemented, the MB price has limited downward space, according to the beginning of 2018. About 35 US dollars per pound price, The discount factor of 0.85 for long orders corresponds to a spot market price of approximately $37 per pound. With the end of the summer off of the Q3 overseas market, the electronic cobalt spot market has traded or recovered, and the Super alloy has entered the market alone. Demand has continued to flourish. MB prices are expected to stabilize after the summer off.

"Consumer electronic stability foundation + new energy vehicles to open space" for subsequent price increases. In terms of consumer electronics, from the perspective of the medium industry, the global historical shipments of consumer electronics products, Q3/Q4 data will be significantly better than Q1/Q2. From the perspective of microenterprise orders, the domestic production capacity of cobalt tetroxide entering the global supply chain system will be significantly better. The order situation continues to warm up and is confirming that the overseas consumer electronics field is warming up; In terms of new energy vehicles, there were about 350,000 vehicles in China from January to June, a cumulative increase of about 124 % year-on-year, slightly exceeding market expectations. The downstream industrial chain links such as host plants fully responded to the new subsidy policy. Judging from the new models launched, A0 and above are the main forces. In June, the proportion of A00 in pure electricity sales dropped from 62 % in May to 33 %, and the model structure was significantly optimized. Overseas, Tesla's substantive promotion of localization in Shanghai's Lingang also exceeded expectations. Tesla's localization will help to boost the Chinese market. In the last week of Tesla Q2, Model 3 produced 5,031 vehicles, and its production capacity has reached 5,000 vehicles per week. Q2 achieved a total sales of about 40,000 vehicles, an increase of 85 % year-on-year. The ring ratio increased by 36 %, of which 18,400 Model 3 and Model SandModel X had a total sales target of 100,000 vehicles. Therefore, the global consumer electronic Q3/Q4 will continue to warm up will stabilize the foundation of demand, the second half of the new energy vehicles high-quality discharge, will open up room for upstream cobalt prices to rise.

With consumer electronic Q3 or seasonal warming, the growth of total volume and structure in the middle and lower reaches of the new energy automotive industry chain will continue to optimize. In particular, under the low inventory of the industrial chain, the demand for raw materials will be pulled or more significantly. Upstream battery materials may usher in demand. turning point.

1) Cobalt: demand inflection point + supply contraction + cost support + low inventory, domestic prices gradually stabilized, after Xiaxiu or stable rebound

The inventory was digested to a low level. Domestic and foreign prices for cobalt continued to hang upside down, at 130,000 tonnes this week, the highest level in 16 years, with inventories of domestic digesting traders / producers/exchanges at low levels.

Supply contracted, cost supported and domestic price cuts were limited. The domestic cobalt salt/cobalt metal spot market transaction is still light. In theory, if there is no low-cost raw material inventory of domestic manufacturers, cobalt salt products have already suffered losses, and some domestic manufacturers have taken the initiative to reduce production and continue to reduce supply and supply. Under cost support, There is limited room for price cuts.

Domestic prices are expected to gradually stabilize, MB prices after the summer break or rebound. Under the combination of "demand inflection point + supply contraction + cost support + inventory low", the future deduction of prices or second-order guidance has narrowed, and domestic prices have gradually stabilized; On the other hand, after the overseas market enters the summer break, the transaction has weakened, and after the MB price has undergone a significant correction, the downward adjustment is expected to narrow, the support level may be at US$ 37 per pound, and with the end of the summer break in the Q3 overseas market, the electronic cobalt spot market has closed or The warm up, demand continues to flourish, MB prices are expected to rebound steadily after the summer break.

2) Lithium: New Resources + New Production Line, Q3 Price is expected to stabilize

Q3 lithium is expected to stabilise. Although the supply of lithium carbonate is under greater pressure in the second half of the year, mainstream battery plants such as BYD, CATL, and Guoxuan are currently full of orders, the operating rate has risen to a high level, and the lithium iron phosphate inventory has basically been cleared, and the production has begun. Prepare goods, demand is expected to increase by the ring; On the other hand, the new supply is subject to the "new resources + new production line" combination needs to debug the wear cycle. Under the "consumer electronics + new energy vehicles" demand resonance, the price is expected to stabilize. More importantly, in the context of sustained growth in demand, the industry cost curve shows that maintaining terminal supply of production capacity and increasing marginal prices may be between 100,000 and 110,000 tons, and that there is limited room for price downward.

3) At present, the valuation level of PE in 2018 has fallen to 15-20 times, and it is firmly optimistic about the Q3 market of lithium electric materials. Core targets: Cobalt: Huayu Cobalt, Hanrui Cobalt, Luoyang Moly; Lithium: Lithium industry, Tianzi Lithium industry, Yahua Group.

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