SHANGHAI, Apr 14 (SMM) – Inventory pressure of lithium carbonate, a raw material for digital and power batteries, may continue to mount in April as Chinese lithium salt producers have not yet planned to wind down production. Elevated inventories together with limited downsides in lithium carbonate prices with support from costs, however, may trigger output cut in the second quarter. 

SMM data showed that the accumulative inventories of lithium carbonate have exceeded 50,000 mt as of early April, which included the amount of lithium carbonate for producing lithium hydroxide. 

Supply of lithium carbonate has increased since March with output recovery amid the slowdown of the spread of the COVID-19 in China. Producers in Jiangxi, the area badly hit by the epidemic, get back to business quickly last month and plants in Qinghai also moved up a gear as the weather improved.  

The overall operating rates at lithium salts producers showed no signs of decline for April, despite an absence of a significant pickup in downstream demand. Some lithium salts smelters that use spodumene as raw materials strived to meet their production targets while no new orders were received. At the same time, cost advantages drove smelters that use mica and salt lake brines as feedstock to keep operating rates at high levels. 

The ramped-up operation will likely offset the impact of maintenance at some key producers in Sichuan and Qinghai in the first half of April. The maintenances are slated to last for 7-15 days. 

SMM expects China’s production of lithium carbonate to rise 12.7% from March to 15,000 mt in April, 26.5% higher from the same period last year. 

Demand for lithium carbonate reduced since mid-March as an escalation in the COVID-19 outbreak outside China took a toll on China’s exports. 

On the consumer battery front, the coronavirus-driven shutdown of South-east Asian factories that consumed Chinese battery materials led to the cancellation of orders, prompting Chinese producers of lithium manganese oxide (LMO), lithium cobalt oxide (LCO) and ternary materials to slow down operations in the second half of March. 

In the power battery market, producers restarted production with the return of automakers, but end-users demand remained sluggish and drove battery mills to delay purchases for raw materials since mid-March. These resulted in thin trades of battery-grade lithium carbonate and reduced orders of industrial-grade lithium carbonate in March. 

Market participants told SMM that power battery producers in China continued to run at low rates, which may depress demand for ternary materials in April. 

Demand for lithium iron phosphate (LFP) from the energy storage sector recovered. This could lift consumption of lithium carbonate to 9,800 mt in April, SMM assessed.