Lithium Hydroxide: In July, as demand for high-nickel ternary materials rebounds, the surplus of lithium hydroxide may begin to narrow

Supply Side: In July, after months of persistent oversupply, some enterprises have seen their lithium hydroxide inventory levels continuously rise, reaching new highs for the year. Data shows that by the end of June, inventory levels in China's lithium hydroxide industry reached 42,200 mt, up 23% MoM and an accumulation of 7,800 mt since the end of May. Given the upcoming low season for the new energy vehicle market in Q3 and increasing pressure on smelters to manage rising stock levels, there may be a slight reduction in their scheduled production. It is anticipated that in July, China's lithium hydroxide production will be 35,220 mt, down 3% MoM and down 36% YoY.

Demand Side: Due to underperforming sales of high-nickel ternary vehicle models in both domestic and international markets, battery cell and cathode segments have been de-stocking since April to mitigate risks. The battery cell sector has prioritized using its own finished cells, reducing raw material procurement for mid-to-high nickel cathodes from upstream suppliers. Similarly, the cathode segment has significantly cut its scheduled production in response to reduced orders and continues to de-stock finished cathode products. By July, many mainstream enterprises in the industry have reduced their inventory levels of battery cells and cathode materials to relatively low levels. Consequently, it is anticipated that these entities will resume purchasing from upstream cathode suppliers during the month. This is expected to effectively boost the demand for high-nickel cathodes and lithium hydroxide.

Considering the slight decline in scheduled lithium hydroxide production this month, coupled with increased stockpiling in the downstream cathode and battery cell segments, the market data from July indicates an ongoing excess of lithium hydroxide, but this surplus is anticipated to ease. Market sentiment indicates that as lithium hydroxide prices continue to trend downward, nearing the production costs of some smelters, lithium salt companies are increasingly determined to uphold prices. However, relatively high inventory levels and doubts among some cathode manufacturers about sustained demand growth still make it difficult for lithium hydroxide prices to rise. In July, as downstream demand picks up, the decline in lithium hydroxide prices is expected to slow down noticeably, but the overall trend will still be downward.