[SMM Analysis: Review of 2024 Spring Festival lithium-ion industry chain market and outlook after the holiday]

Lithium Carbonate

Affected by the continued losses in lithium salt companies purchasing lithium ore externally, which triggered to production suspension or reduction, as well as the seasonal maintenance of some lithium salt companies, it is preliminarily estimated that China's lithium carbonate output in February will decline by about 23% month-on-month to around 32,000 mt. Most of the salt plants under maintenance will gradually resume production around Lantern Festival, but most of the small and medium-sized lithium salt ones who rely on externally sourced lithium ore will resume production based on market conditions. This may mean that China's lithium carbonate output will face a brief supply gap in late February. In addition, Chile exported 9,818 mt of lithium carbonate to China in January, which was at a relatively low level in recent years. After the delivery of lithium carbonate futures warehouse receipts before the festival, most of the warehouse receipts are now concentrated in trading companies. In addition, lithium carbonate futures prices on the Guangzhou Futures Exchange generally declined in the last week before the festival, while lithium salt companies mostly maintained a firm pricing strategy to sell spot cargoes since mid-January. The above situation may provide opportunities for the spot market to see rising premiums in the short term after the festival. However, during the Spring Festival holiday, a small number of lithium salt companies still maintained normal production but logistics stopped operations. The market may show a pattern of overall inventory build-up at lithium salt companies and inventory drawdown at downstream cathode companies. Continued attention is still needed on overseas lithium price changes, resumption progress at lithium salt firms purchasing overseas lithium ore, and the extent of demand recovery downstream.

Lithium Ore

Affected by the seasonal maintenance of most lithium salt companies during the Spring Festival holiday and the impact of suspended logistics, lithium ore trading was relatively flat, with fewer price negotiations overall. Currently, domestic spodumene inventory levels remain adequate, and major lithium salt plants still have high spodumene inventory levels. At the same time, some small lithium salt plants relying on externally sourced lithium ore face uncertainties about price trends after the festival, and have also taken a wait-and-see approach towards subsequent lithium ore procurement currently. For spodumene imports, import arrivals in February may remain at a relatively high level due to arrivals under long-term contracts and massive shipments from Africa. In terms of domestic ore output, spodumene mine output in February is still expected to be limited due to weather conditions. While lepidolite output is at a relatively high level driven by the high operating rates at some integrated mines. Continued attention is still needed on changes in downstream lithium ore destocking and the resulting raw material demand changes brought about by the extent of demand recovery downstream.

Lithium Hydroxide

Overall trading in the lithium hydroxide market was relatively light during the 2024 Spring Festival holiday. On the supply side, some major lithium salt plants have recently carried out planned suspensions and maintenance, with declining self-production and outsourced orders at smelters. On the demand side, most ternary cathode companies completed stockpiling ahead of the festival and carried out pre-holiday production scheduling, so operations during the Spring Festival holiday had been relatively bleak, with slow inventory drawdown. But a few ternary cathode companies saw continuously rising orders due to downstream changes in battery cell technical routes, leading to full capacity utilization during the holiday, so their willingness for subsequent lithium hydroxide procurement remained strong. After the holiday, while some manufacturers remain cautiously observant in the short term, price trends are expected to be mainly stable. But considering lithium hydroxide inventory at manufacturers has declined to a relatively low level in recent months, and the supply-demand landscape has improved, subsequent demand recovery downstream may lead some high-nickel manufacturers to conduct small restocking after the holiday, which may reduce low-priced supply in the market, and transaction prices may rise steadily.

Cobalt

During the Spring Festival holiday, the cobalt market was basically dormant due to transportation issues. By product variety: For refined cobalt, production had been relatively normal during the holiday thanks to acceptable profits and convenience for storage. Smelters maintained normal post-holiday operations. For cobalt salts, affected by meager profits and even inverted margins, large plants reduced production for around 3-5 days, while small- and medium-sized plants were basically shut for half a month or even longer. After the Spring Festival holiday, some medium- and large-sized plants have gradually resumed production, while small plants have had delayed resumption. On the demand side, as downstream players carried out pre-holiday stockpiling, market procurement demand currently appears to be in a wait-and-see state. For Co3O4, as downstream orders have been high, smelter output during the holiday had been acceptable. But as logistics was affected during the Spring Festival, there were barely new orders. It is expected that after the holiday, the market will maintain delivery based on orders, demand recovery will be slow as buyers may adopt a wait-and-see approach.

Ternary Precursor

In February 2024, on the demand side, as most cathode companies took leave during the holiday due to logistics disruptions, demand for precursors declined. On the supply side, as overseas holidays had been shorter, ternary precursor companies with overseas orders basically maintained production. In the domestic market, the suspension at bases of some leading precursor firms drove an overall slide in ternary precursor market volume.

Ternary Materials

In February 2024, the traditional off-season arrived, and ternary material output declined in sync. On the supply side, most cathode plants cut production due to the holiday factor, with very few benefiting from rising demand from downstream medium-nickel battery, enabling them to achieve output growth against the trend. On the demand side, battery cell plants arranged holiday leave around statutory holidays and order situations in February. Some firms completed stockpiling in January, leading to declining procurement demand for cathodes.

Lithium Iron Phosphate and Iron Phosphate

Some production lines continued operating during the holiday, while suspended lines gradually resumed work after the fifth day of the first lunar month (February 13). Overall, the concentrated production resumption time at companies was around February 18. Iron phosphate companies’ production and logistics plans mainly follow the production schedules and safety stock levels of downstream lithium iron phosphate companies to ensure downstream customer demand.

Raw material inventory: Large stockpiling ahead of the Spring Festival holiday. Some iron phosphate companies maintained logistics shipments during the holiday, but logistics costs during this period were 30% higher than usual. After the concentrated resumption, lithium iron phosphate companies will replenish inventories based on raw material stock levels, with priority given to replenishing iron phosphate as consumption is high. In terms of prices, as supply-demand conditions did not see major changes after the holiday amid inverted margins and overcapacity, lithium iron phosphate and iron phosphate prices will remain stable. Although some iron phosphate companies plan to raise prices due to high production costs and some increase in demand, it will be difficult for prices to rebound.

LCO

February was an off-season for the LCO market, with most manufacturers arranging holiday leave around statutory holidays and very few able to maintain uninterrupted production operations. After the holiday, some companies will resume production, but as downstream demand remains weak due to advance stockpiling in January.

Energy Storage and EV

During the holiday period, most energy storage companies had been on leave, and the overall market was relatively quiet. It is expected that the market will gradually recover after the holiday. In the short term, the overall probability of a major rebound in demand in the first quarter remains low.

China's NEV production and sales in January 2024 were 787,000 units and 729,000 units respectively, down 32.9% and 38.8% month-on-month. Entering February, as pre-holiday promotional activities stimulated car purchase demand in advance, consumer demand was bleak during the Spring Festival holiday, and dealers still need to digest inventory. China's new energy vehicle production and sales will continue to decline month-on-month in February. On the power battery end, carmakers' willingness to replenish inventory and stockpile will weaken, and demand for power batteries will continue to slide. Also, many power battery manufacturers had stocked up raw material inventory ahead of the festival in advance and adjusted their own production pace. Most are expected to continue holiday leave during the Spring Festival. Under weak supply and demand, the power market had lackluster performance during the holiday.

Separator

Recent separator prices have been stable. Overall trading in the separator market was relatively light during the Spring Festival holiday. On the supply side, most second- and third-tier separator companies and some leading companies had varying degrees of output cuts and maintenance plans before and after the Spring Festival. February output is expected to decline by about 8% from January. On the demand side, as most battery cell makers already had some safety stock of separator materials before the festival, and downstream operations had been bleak during the holiday amid slow destocking, downstream will still mainly focus on inventory reduction in the short term after the holiday, putting pressure on prices.

Anode

During the Spring Festival period, due to low market demand, suspended logistics and other reasons, anode-related transactions had been few, with companies mostly maintaining production at low capacity utilization rates and some suspending production for maintenance. As market performance in March remains unclear, the production and operation pace at anode companies after resuming work will still be relatively slow for now, with limited recovery, mainly observing market trends and controlling inventory. For raw materials, shipments of petroleum coke and needle coke also turned light during the Spring Festival, mainly spot procurement orders, with little price volatility. Overall, the anode industry chain operated weakly and stably during the Spring Festival, sliding demand led to smaller market changes, production at anode companies will warm up to some extent after the holiday with demand recovery downstream, and raw material procurement will also increase, but companies remain cautious for the most part, and actual increments in the industry may be limited.

Electrolyte

Electrolyte market prices are temporarily stable after the holiday. On the supply side, most electrolyte plants had normal statutory holiday leave during the Spring Festival, and will gradually resume production from mid- to late February. A small number of electrolyte plants have delayed resumption due to weak demand, but as hazardous chemicals transportation had been restricted during the Spring Festival coupled with some cell makers front-loading February orders, the operating rate at electrolyte plants may decline further in February. As electrolytes are basically not held in inventory, subsequent price and output changes will mainly depend on the recovery in terminal markets. Electrolyte prices are expected to remain stable in the short term.

Recycling

Prices in the recycling market were temporarily stable from before to midway through the festival due to the Spring Festival suspension of logistics, with almost no bulk waste transactions in the market. The few transactions would require self-pickup by chartered transport. About half of the companies resumed work around the tenth day of the first lunar month, but another half have suspended production for holiday leave until Lantern Festival, delaying resumption time based on demand recovery conditions in the market. Currently, prices of ternary and LFP battery scrap in the market are temporarily stable. Due to severe loss based on pre-holiday black mass discount coefficients, most hydrometallurgy plants are more inclined to purchase goods after the holiday. If demand remains stable, willingness to accept high-priced scrap is not high. At the same time, some hydrometallurgy plants chose to purchase brine, electrolyte and lithium phosphate to extract lithium. The overall market conditions have been relatively flat.

Prices in the recycling industry's cascaded utilization market before the festival also remained basically stable. On the demand side, downstream transaction volumes declined further before the Spring Festival, with most companies sticking to a procurement strategy based on demand and unwilling to stockpile excess inventory. Supply was also muted before the holiday.

Sodium-ion Batteries

News about sodium-ion batteries recently continues to focus on technology breakthroughs and project contracts. More companies remain optimistic about the development of sodium-ion batteries. Domestically, news mainly revolve around technology patent applications from large companies, financing rounds for startups, and energy storage project contracts. Overseas, companies from more regions have started promoting R&D and commercialization of sodium-ion batteries. For example, recently, an Indian sodium-ion battery company achieved a technology breakthrough.