Continued weak end-market demand led to a decline in China lithium battery cell production in October

In October 2023, battery cell production in China was 83.5Gwh, down 2% MoM and 3% YoY. Ternary batteries production was 23.72Gwh, down 2% MoM and 30% YoY. However, LFP battery cell production hit 59.46Gwh, down 3% MoM but up 15% YoY. Battery cell companies primarily focused on inventory reduction in October. Although lithium carbonate prices briefly rose mid-month, insufficient end-user demand led to a late October price drop, causing a continuous decline in key lithium battery material prices like cathodes and electrolytes. Due to lower raw material prices and lack of end-user demand, both power and energy storage battery cell prices continued to decline in October.

In terms of demand, the overseas NEV market, which mainly uses high-nickel ternary batteries, has seen a continuous sales slump, leading to weak shipment volumes and reduced high-nickel ternary battery production. Domestically, as year-end nears, major automotive companies have aggressively pushed promotional campaigns, slightly boosting October car sales. For the energy storage market, due to early stockpiling and demand falling short of expectations, energy storage cell production continued to decrease. As domestic energy storage enters Q4, order volume has slightly increased due to year-end grid connection deadlines. However, due to fierce market competition and expected continued battery cell price declines, some energy storage projects have been deferred to next year, limiting domestic demand stimulus.

Battery cell factories are expected to continue reducing production to clear inventory in November, and SMM predicts China's battery cell production will be 79.4GWh in November, down 5% MoM and 4% YoY.