SMM Analysis of China December LFP Production and January Forecast

In December, China's LFP production decreased by 3.62% MoM, with a YoY increase of approximately 190%. The overall operating rate slightly declined to 61%.
Supply side, LFP producers remained active in production. Except for slight production cuts by some producers due to year-end factors, others maintained stable production MoM. Demand side, January's overall demand remained robust. Particularly in the ESS sector, overseas rush for installations provided strong YoY support. Near year-end, the power battery sector saw strong production and sales. Coupled with low processing fees, downstream demand remained stable with no significant reduction.
In January, demand side is expected to change. The ESS sector will be affected by the end of the year-end grid connection deadline on December 31, while the power battery sector will face the conclusion of the trade-in policy. These factors are expected to lead to a significant MoM decline in LFP production, estimated at around 11.6%.