China's electric vehicles, known domestically as the new energy vehicle, is expected to register positive growth for the remainder of this year due to the government's stimulus policies, but many in the market doubt whether prices of battery metals, which are used in the batteries that power NEVs, will recover as a result.
China's NEV sales may total 1.1 million units this year, including more than 100,000 units of Tesla, China's Association of Automobile Manufacturers estimated. Its NEV sales totaled 486,000 units over the January-July period, down 32.8% from a year earlier, which means that about 614,000 units of NEV will be sold during the remainder of this year.
In mid-July, China's Ministry of Industry and Information Technology, its Ministry of Commerce and Ministry of Agriculture and Rural Affairs announced that they will promote the sales of NEV in rural areas during July-December.
China will also encourage cities to ease the NEV purchase limits and provide some subsidies for purchasing NEVs in the second half of this year, the National Development and Reform Commission said in early August.
Effective April 23, the country extended subsidies for NEVs till the end of 2022, while the purchase tax for buying NEVs will continue to be exempted till the end of 2022.
The stimulus policies are expected to help boost NEV consumption in the remainder of this year. S&P Global Market Intelligence has forecast that China's total plug-in vehicle sales, including commercial vehicles, will reach about 1 million units. Sales in the last five months is estimated to account for 52% of annual sales, which was largely driven by pent up demand amid a continued recovery.
BATTERY METALS OUTLOOK AMBIGUOUS
However, battery metals prices are expected to fluctuate and may not see a significant increase for the remainder of this year, the founder of China's RealLi research company, Mo Ke, said. The demand for LFP, or lithium iron phosphate, batteries will see significant growth this year, which will lend some support to industrial grade lithium carbonate. However, the demand for ternary materials and the usage of cobalt will both decline.
"Lithium carbonate prices are now at the bottom, but it might take a long while for the prices to go up. It is less possible to see a V-shape rally on lithium prices," an eastern China-based cathode materials producer said.
The tightness in supply of raw cobalt was caused by the coronavirus and the ample cash flow will help boost cobalt prices, however, cobalt demand for NEVs remained weak, a cobalt chemicals supplier in the region said, adding that how prices will trend going forward will depend on the relationship between supply and demand.
S&P Global Platts assessed battery grade lithium hydroxide prices down Yuan 500/mt on Aug. 14 to Yuan 48,000/mt ($6,914/mt) and lithium carbonate steady at Yuan 40,000/mt. Both assessments are on a delivered, duty paid China basis.
Sentiment among market participants was mixed despite rising output and sales of NEVs and its batteries, as demand for battery grade lithium carbonate and hydroxide remained sluggish, market sources said.
Market Intelligence expects lithium prices to continue to decline in the third-quarter before improving slightly in the fourth-quarter, thanks to the stronger performance of China's plug-in vehicles market, and the depletion of lithium inventories for the battery value chain.
