SMM Exclusive: China's Metals Output In July And Forecast For August 

SHANGHAI, Aug 10 (SMM) –
Copper cathode
China's copper cathode output in July was 925,900 mt, an increase of 8,000 mt or 0.9% month-on-month, and a growth of 10.2% year-on-year; The output increased 23,800 mt compared with the expected 902,100 mt. The output totalled 6.49 million mt from January to July, an increase of 639,300 mt or 10.94% year on year. Although there were seven smelters undergoing maintenance in July, the impact on many smelters was less than previously expected thanks to abundant supply of blister copper and anode plates. And benefited from a newly commissioned smelter in Shandong, the output in July exceed expectations. This can also be reflected in the rebound of RCs for blister copper. According to the latest statistics from SMM, as of July 28, the average RC of blister copper in the south was 1,000 yuan/mt, an increase of 200 yuan/mt from the beginning of July. The average operating rate at copper smelters stood at 86.49% in July, flat on the month. (SMM increased capacity of the survey samples by a combined 90,000 mt, adjusting the capacity of JCC Guoxing (Yantai) Copper and increasing the capacity of Baotou Huading. The current total capacity of the survey is 12.575 million mt/year). According to SMM statistics, only one smelter has overhaul plan in August. The smelters that undertook maintenance will restart production and newly commissioned smelters will yield output. These, combined with the absence of raw material shortages, will increase total domestic output significantly in august. The output increase brought about by the production resumption of a smelter in Inner Mongolia will account for about 48%. Domestic copper cathode output in August is estimated at 986,100 mt, up 60,200 mt or 6.50% month on month and 15.1% year on year to hit a record high. The cumulative output from January to August is expected to be 7.47 million mt, an increase of 11.47% or 768,900 mt year-on-year. According to SMM statistics, the number of smelters with maintenance plans in the fourth quarter will decrease significantly, with 6 in September, 3 in October, 1 in November, and none in December. Therefore, SMM expects that the output will decline slightly in September, but will remain at high levels in the following months.

Aluminum
According to statistics from the SMM, China's domestic aluminum output in July 2023 (spanning 31 days) amounted to 3.568 million mt, representing a year-on-year increase of 1.95%. The average daily production in July experienced a month-on-month surge of over 3,000 mt, reaching approximately 115,100 mt. From January to July, the total domestic aluminum production tallied up to 23.676 million mt, marking a year-on-year cumulative growth of 2.7%. In July, the molten aluminum ratio in the industry experienced minor fluctuations while maintaining a general stability, with the increased capacity in the downstream part of the sector leading to a reduction in ingot volumes among certain companies. This resulted in a month-on-month rise of the molten aluminum ratio by 0.6 percentage points, hitting around 72.6%. Based on SMM's molten aluminum ratio calculations, July's domestic aluminum ingot volumes saw a year-on-year decrease of 16.6%. The overall volume of domestic ingots from January to July was roughly 7.2 million mt, indicating a year-on-year drop of 12.2%
Production Capacity Changes: July saw a considerable rise in China's operational production capacity, largely attributed to a significant production increase in the Yunnan region. The resumed production reached around 1.22 million mt, bringing the total scale of Yunnan's resumed production to approximately 1.48 million mt when combined with June's figures. This total includes the introduction of 140,000 mt from relocated production capacity. The primary contributors to the domestic production decrease in July were the cessation of 150,000 mt of relocated production capacity in Shandong and a decrease of 80,000 mt due to maintenance operations in Sichuan enterprises, resulting in an overall reduction of around 230,000 mt. According to SMM statistics, the installed capacity for aluminum in China is roughly 45.19 million mt, which includes capacities that have been constructed but are not yet operational or have not been phased out. The operating capacity has grown to nearly 42.16 million mt, hitting a historical high. The national aluminum operation rate was at approximately 93.3%, marking an increase of 2.7 percentage points over the previous month.
Production Forecast: As we enter August, major aluminum factories in Yunnan are steadily resuming production. Currently, there is still nearly 620,000 mt of capacity waiting to resume production within the entire province of Yunnan. Of this, 490,000 mt are expected to be back online by the end of August. Moreover, Yunnan has some additional relocated production capacity, and there is an ongoing expectation of more capacity coming online in August. Considering the capacity changes in other regions, SMM predicts that by the end of August, the total operating aluminum capacity in China may approach close to 42.7 million mt. The total domestic aluminum production for August (31 days) is expected to reach about 3.60 million mt, a year-on-year increase of 3.5%. Moving forward, it will still be necessary to continuously monitor the power and aluminum business operations in the southwest region and other areas.
Alumina
SMM data indicates that during July (spanning 31 days), China's metallurgical-grade alumina output reached 6.869 million mt. Daily production saw an increase of 6,600 mt to reach an average of 222,000 mt/day. This surge is attributed mainly to the phased release of newly added capacity, coupled with the conclusion of maintenance in several Guangxi region companies, leading to a gradual resumption of production and, consequently, an uptick in daily production. A comparison with the previous month's data reveals an additional production day in July compared to June, which resulted in a month-on-month total production increase of 6.3%.
An examination of the year-on-year data reveals a 1.5% increase in alumina production this July relative to the same period last year. This surge is primarily attributable to the input from newly commissioned alumina production capacities. Furthermore, the capacity utilization rates in regions with higher production costs have consistently remained at a low level throughout the year. As of the end of July, China's built alumina capacity reached a volume of 100 million mt, with an operational capacity of 81.08 million mt, culminating in a nationwide utilization rate of 81.1%.
In Shanxi province, the operation rate was recorded at 68.8%, marking a slight increase of 0.4% over the previous month. This persistently low figure can be primarily attributed to the constrained supply of domestically-sourced ores.
In Henan, specifically the Sanmenxia area, production of domestic ores has been suspended due to land reclamation policies, with no immediate prospects for resumption. Some companies have reported that the procurement of ores from the proximate Shanxi province is unlikely, given concerns over ore quality. The already soaring production costs make the use of imported ores unfeasible, hence the operation rate remained low at 64% in July, albeit a modest rise of 0.7% from the previous month.
In Guizhou, certain alumina refineries underwent scheduled maintenance in July. However, due to their well-structured adjustment plans, the maintenance period hasn't significantly impacted the month's production. The operation rate for the province held steady at 84.5%, consistent with the previous month.
In Hebei, the operation rate for July reached 93.1%, up by 2.5% from the previous month. This surge is primarily a result of the increased output from newly commissioned capacities in the region, which are anticipated to reach full production in the near future.
In Guangxi, the operation rate climbed from 86.2% in the previous month to 88.6%. This rise can be largely attributed to the resumption of production by certain companies following their maintenance period in July. However, due to issues related to ore availability, the operation rate remains low for some firms.
Lastly, Shandong province reported an operation rate of 94.1%, marking a notable increase of 3.7% from the previous month. This increase is primarily due to the consistent rise in output from new capacities in the region, coupled with the ongoing rebound in spot prices, thereby enhancing the propensity for production compared to earlier periods.
Forecast for August: It is anticipated that the new capacities in Hebei will gradually ramp up to reach full production in August. In contrast, due to issues related to ores and production costs, Henan might continue to curb production. While the continuous rebound in spot prices in Shanxi has increased the willingness of companies to boost production, there may be a tendency for downstream aluminum smelters to adopt a wait-and-see approach, leading to a weakening spot transaction. Thus, it's possible that these companies may maintain steady production levels.
In Guangxi and Guizhou, the resumption of production in southwestern aluminum smelters has stimulated a recovery in demand. However, considering the constraints in ore extraction faced by individual companies in the southwest, flexible production is anticipated to predominate.
Hence, SMM estimates an average daily production of 224,000 mt/day in August, with a total operational capacity of approximately 81.73 million mt/year.
Primary lead
In July 2023, the domestic output of refined lead was 319,700 mt, an increase of 9.1% month-on-month and 21.94% year-on-year; the cumulative output from January to July 2023 increased by 17.63% year-on-year. Total production capacities of enterprises in the survey totalled 5.84 million mt in 2023. According to the SMM survey, large-scale refined lead smelting enterprises in Henan, Yunnan, Inner Mongolia, Shandong and other regions completed their maintenance and resumed production in July, growing output. During the period, lead smelting enterprises in Yunnan, Hunan and Anhui failed to reach full production due to maintenance or insufficient supply of lead concentrate, resulting in regional supply tightness. In August, the production of most refined lead smelting enterprises will be relatively stable, and the output in August is expected to stabilise. A large-scale producer of deliverable brand in Henan has plans to cut output sharply in August due to maintenance from August 1-20. Meanwhile, enterprises in Henan, Anhui, Hunan and other places will end maintenance. China's refined lead output is estimated at around 320,000 mt in August. In addition, we need to continue to pay attention to the supply of lead concentrate in August, and whether the impact on the production of lead smelting enterprises will increase. The Central Economic Commission of the Wa State issued the Notice on the Implementation of the Suspension of All Mineral Resources Exploitation in May. Since August 1, the Wa State of Myanmar has stopped all exploration, mining, and processing operations at all mines. According to Customs data, China's imports of lead concentrate from Myanmar accounted for 6% of the total imports in 2022, and the main users were refined lead smelting enterprises in Yunnan. Since the policy has been released for 3 months, most of the Chinese lead smelting enterprises have restocked lead concentrate stocks. However, since the production halts at mines in Wa State, the supply of lead concentrate market has become tighter. This lowered TCs of lead concentrate again with TCs of Pb 50% lead concentrate in Yunnan at a low of 800 yuan/mt with metal content). The supply issue of lead concentrate, if further escalated, will restrict the production of refined lead enterprises. And the output in August can fall slightly.
Secondary lead
The output of secondary lead in July 2023 was 375,700 mt, an increase of 3.16% from June and a decrease of 5.53% year-on-year; the cumulative output of secondary lead from January to July 2023 was 2.49 million mt, a cumulative increase of 1.63% year-on-year. In July 2023, the output of secondary refined lead was 335,200 mt, an increase of 4.87% from June, and a decrease of 1.38% year-on-year; from January to July 2023, the cumulative output of secondary refined lead was 2.17 million mt, a cumulative increase of 2.09% year-on-year. According to SMM survey, there were many secondary lead smelting enterprises closed for maintenance in June. After July, many secondary lead smelting enterprises in Anhui, Hunan, Inner Mongolia and Jiangxi resumed production after maintenance. Meanwhile, one smelter in Liaoning stabilised output of its newly commissioned refined lead production line. Several smelters in Xinjiang, Yunnan and Guizhou failed to reach full production due to maintenance or tight battery scrap supply. In August, lead prices fluctuated at high levels, and downstream purchasing interest improved. Most secondary refined lead smelting enterprises would increase production. While a large smelter in Ningxia reported significantly output decline due to maintenance, there will be smelters in Yunnan, Inner Mongolia, Jiangsu and Guangdong resuming production in August. The output in August is expected to still be on an upward trend. It is worth noting that the new production capacity in Anhui is about to go into operation, and large smelters in Jiangxi also have plans to increase output. As the tight supply of battery scrap can hardly ease, SMM expects the output of secondary refined lead in August to be around 353,900 mt.
Refined zinc
In July 2023, SMM China's refined zinc output was 551,100 mt, a decrease of 1,400 mt or 0.26% month-on-month, and a year-on-year increase of 15.79%, slightly exceeding expectations. From January to July, the cumulative output of refined zinc reached 3.777 million mt, a year-on-year increase of 9.59%. The domestic zinc alloy production in July was 86,983 mt, an increase of 8,756 mt from the previous month. In July, the output reduction of domestic smelters was mainly seen in Inner Mongolia, Shaanxi, Gansu and Xinjiang, and slightly lower than expected. Smelters were basically undergoing maintenance according to plans, and there was no unexpected shutdown except in Xinjiang. Meanwhile, the domestic supply of zinc concentrate was relatively abundant. In addition, zinc prices rebounded slightly in July, and smelter’ profits increased. Some smelters increased production faster after maintenance and contributed part of the growth. Due to the new overhaul of smelters in Hunan at the beginning of August, SMM adjusted the estimated domestic refined zinc output in August 2023, which will fall by 700 mt to 550,400 mt from the previous month, but an increase of 18.94% year-on-year; the cumulative output from January to August will reach 4.328 million mt, an increase of 10.69% year-on-year. In addition to routine maintenance, there were maintenance at smelters in Hunan and the reduction in production affected by the FISU World University Games. Nonetheless, some smelters completed maintenance earlier or postponed maintenance, limiting the drop in output from July.

Refined tin
The SMM survey revealed China's refined tin output in July was 11,395 mt, a 19.88% decrease from June and a 128.82% rise YoY. The total output from January to July reached 96,119 mt, up 9.58% YoY. A mid-July maintenance shutdown at Yunnan Tin Group caused the July decline. The impact of technical adjustments at Yinman Mining on one Inner Mongolia smelter's output lessened. Two smelters in Guangdong and Guangxi finished maintenance in July, boosting tin output.
Entering August, China will have an ample tin ore supply. However, due to Myanmar's Wa State mining ban, supply might tighten. SMM data indicates that China’s tin ore imports from Myanmar in June were 16,196.9 mt, a 16.1% increase from May. July's estimated imports rose to 26,500 mt, a 63.61% jump from June. Yunnan smelters report a more abundant local supply than in H1 2023. Chinese smelters are expected to maintain regular operation in August, but the Myanmar ban could gradually restrict China's tin ore supply.

Refined nickel
In July 2023, China's refined nickel output was 21,500 mt, rising 5.39% MoM and 34.38% YoY. The July growth met expectations. SMM survey revealed that the high nickel prices and dropping nickel sulphate prices boosted electrowinning nickel profits. New production lines maintained steady output, and factories in North and South China continued to ramp up production.
In August 2023, China's refined nickel output is forecasted at 21,650 mt, a 0.7% MoM increase and 39.68% YoY rise. The growth is due to some smelters in July not being at full capacity and some electrowinning nickel production lines in South China ramping up output.

Nickel Pig Iron (NPI)
In July 2023, China's NPI output was 32,800 mt in nickel content and 766,000 mt in physical content, down 2.32% from June and up 5.15% YoY. Favourable policies supported NPI prices in July. However, high nickel ore prices squeezed NPI manufacturers' margins, reducing output. The high-grade NPI output was about 26,100 mt in nickel content, up 0.03% from June. The low-grade NPI output was 6,700 mt in nickel content, down 7.28% from June. The divergence was in line with expectations. For downstream steel enterprises, high-grade NPI was more cost-effective.
China's NPI output is forecasted to be about 34,200 mt in nickel content in August 2023, up 4.33% MoM. SMM research indicates that August is the peak month for stainless steel. With upstream optimism about August prices, higher demand might boost NPI output.
Indonesian NPI
In July 2023, Indonesian NPI output was 119,400 mt in nickel content, a 2.65% MoM decrease and a 30.8% YoY increase. The 2023 total output reached 766,000 mt in nickel content, a 20.1% YoY rise. This July decrease was anticipated. Policy-wise, Indonesia's local tax and trade underwent subtle shifts. Rising LME prices kept nickel ore prices high, reducing profit margins for some producers. However, varying technological capabilities mean profit disparities among enterprises, with some still finding production profitable. In August, it is expected that the Indonesian NPI output growth will remain limited and is projected to reach 120,200 mt in nickel content, up 1.29% from July and 20.3% YoY.

Nickel Sulphate
In July 2023, China's nickel sulphate output was 40,000 mt in metal content and 182,000 mt in physical content, rising 14.0% MoM and 33.6% YoY. Ternary cathode precursor output went up by 5% from June, boosting nickel sulphate production. Despite this, July saw limited inquiries and spot transactions, with small factories' output remaining consistent. The growth in nickel sulphate output surpassed that of ternary cathode precursor, leading to an oversupply and price drop in July. August is expected to see a 5.0% MoM increase in nickel sulphate output, driven again by the growing output at integrated ternary cathode precursor producers.

Manganese Sulphate (Battery-Grade)
In July 2023, China's production of high-purity manganese sulphate approximated 17,300 mt, marking a month-on-month decrease of 21.36%. In terms of supply, our understanding from SMM is that the output of high-purity manganese sulphate was impacted by three factors, leading to a decline in production. Firstly, larger-scale enterprises have once again scaled back or ceased production. Secondly, businesses in the early stages of resumption needed to fine-tune their equipment, which prevented stable production. Lastly, due to typhoon weather conditions, some businesses suspended operations and took holidays. Consequently, the overall operational rate for high-purity manganese sulphate production was relatively low in July. However, considering the ample stockpile from previous periods, there are no immediate concerns of a shortage.
Moving into August, information from SMM indicates that top-tier ternary precursor enterprises are still experiencing steady growth, with only smaller and medium-sized enterprises forecasting a decrease in production. All in all, the demand for high-purity manganese sulphate remains solid. Concurrently, enterprises in the early stages of resuming high-purity manganese sulphate production are progressively stabilizing, with inventory pressures across various businesses also showing signs of easing. For August, the forecasted output of high-purity manganese sulphate is about 21,700 mt in physical content, a month-on-month increase of 25.43%.

Electrolytic manganese dioxide (EMD)
Data from SMM indicates that in July 2023, the production of electrolytic manganese dioxide (EMD) in China was approximately 11,600 mt, which includes 2,700 mt for the LMO battery, 6,100 mt for the alkaline manganese battery, and 2,800 mt for the zinc-carbon battery. This represents a month-on-month increase of 4.43% but a year-on-year decline of 52.54%. From January to July 2023, the cumulative production was about 76,400 mt, demonstrating a year-on-year decrease of 61.71%. The increase in the monthly output was primarily seen in the EMD used for alkaline manganese battery and LMO battery. One contributing factor was the influx of catch-up orders from overseas original equipment manufacturers (OEMs) earlier on, which spurred an increase in the operational rate of domestic enterprises in the alkaline-manganese battery sector. Another factor was that despite a slump in the LMO output for the month, the leading enterprises did not reduce their order volumes, ensuring a steady demand for the LMO–oriented EMD enterprises.
It is understood that the effects of sluggish end-user consumption in the LMO sector will progressively amplify in August, resulting in a further reduction in the production schedule of LMO enterprises. Consequently, a slight downturn is anticipated in the production of LMO-type EMD in August, while output of EMD for alkaline manganese and zinc-carbon battery is expected to maintain relative stability. Therefore, the projected production of EMD in August is approximately 11,300 mt.

Trimanganese tetroxide (Mn3O4)
According to data from SMM, the production of Mn3O4 in China for July 2023 amounted to an estimated 10,300 mt, consisting of 4,000 mt of electronic grade and 6,300 mt of battery grade. This signifies a decrease of 9.05% from the previous month and a decline of 26.26% compared to the same period last year. From January to July 2023, the cumulative production was approximately 77,300 mt, reflecting a year-on-year decrease of 10.38%. The primary reason for the monthly production decrease lies in the current off-peak season for the home appliance and consumer electronics industries, leading to a certain extent of reduction in operating rates among downstream enterprises and consequently, a diminished interest in procuring electronic and battery grade Mn3O4. In order to avoid amassing excessive inventory, Mn3O4 enterprises have correspondingly lowered their operating rates.
Based on market feedback, the prospects for the downstream market of Mn3O4 seem unlikely to improve as we move into August. The scenario of weak supply and demand is expected to continue, with the total production of Mn3O4 in August predicted to be around 9,700 mt.

High-carbon ferrochrome
China’s output of high-carbon ferrochrome remained stable at 601,500 mt in July, an increase of 1,200 mt, or 0.2% MoM, and an increase of 40,900 mt, or 7.3% YoY. The output in Inner Mongolia was 383,300 mt, an increase of 11,400 mt or 3.06% from the previous month. The output in Sichuan was 29,200 mt, a decrease of 28.78% from the previous month. In July, although bid prices by mainstream steel mills dropped slightly, the decline was smaller than market expectations. The profit margins for northern ferrochrome manufacturers existed, and some new production lines were put into operation, further increasing the output of ferrochrome in Inner Mongolia. However, the opening of the Universiade in Sichuan limited the output of enterprises in the local region.
High-carbon ferrochrome output is expected to be 621,900 in August, which slightly dropped from July. Since the production schedule of stainless steel in August remains at a high level and the bid price from steel mills only dropped slightly, the demand for ferrochrome is relatively high. The previous pessimistic sentiment in the ferrochromium market dissipated and the trading volume expanded. Most ferrochrome factories’ orders were fully booked, making it difficult to find spot goods in the market. Therefore, the ferrochrome quotes trended higher. In Guizhou and Guangxi, due to the rule adjustment of peak and valley electricity prices, enterprises staggered production, reducing electricity costs.
Stainless steel
According to an SMM survey, the domestic stainless steel output totaled 3.1645 million mt in July, a drop of 12.90% month-on-month compared with June and 16.41% year-on-year. The output of the 200-series steel rose 4.49% MoM to 899,600 mt, that of the 300-series steel increased 22.61% MoM to 1.6458 million mt, and that of the 400-series steel rose 4.84% MoM to 578,700 mt.
In early July, affected by the traditional off-season, the terminal market was still sluggish, so most of the market transactions were based on rigid demand purchases. In late July, boosted by positive macro sentiment and the support of raw materials, the market transaction situation improved somehow, and the overall price rose. In June, some steel mills in South China stopped production or conducted maintenance due to sudden heavy rain, causing the total output of 200-series and 300-series stainless steel to be reduced by 120,000 mt. In July, with the expanding profit margins of 200-series and 300-series stainless steel, and rising orders in East China, stainless steel production increased significantly. A steel mill in Northwest China has maintenance plans in July and August due to losses, thus the production of 400-series steel may be affected to some extent.
It is expected that there will be significant production growth in August. The traditional peak season of September-October makes steel mills and traders optimistic about the downstream market demand. Due to the good condition of receiving orders, a steel factory in South China will continue to delay its maintenance plan. Social inventory declined slowly in July. A large steel mill in East China received more orders in August.
EMM
Data from SMM reveals that China's electrolytic manganese metal (EMM) production for July 2023 reached 58,600 mt, marking a monthly decrease of 1.71% and an annual decline of 43.44%. Between January and July 2023, the cumulative EMM production in China was around 612,800 mt, indicating a year-on-year surge of 33.65%.
The fall in July's production primarily stemmed from two factors: although most small factories recommenced production operations after July 10th, a handful of large-scale factories had premeditated plans to curtail production in July. This led to a net reduction in output across EMM factories.
Regarding demand, there was an uptick in the total output of crude stainless steel nationwide in July, predominantly in the 300 and 400 stainless steel series, while the production volume of the 200 series remained relatively stable. Also, given that EMM's economic viability still lags behind that of ferromanganese, downstream consumers largely maintained essential procurement, keeping EMM price trends under constant pressure.
As we move into August, there's an anticipation of increased production across domestic steel mills, buoyed by the industry's positive outlook towards the forthcoming peak consumption season. Conversely, many overseas steel mills remain in their summer recess period. In light of the rapidly falling EMM prices, a significant number of market players are adopting a wait-and-see approach with limited trading activity, projecting an uptick in procurement once market prices bottom out. Moreover, as EMM solidifies its role as an economically viable source of manganese for steel mills, it could potentially enhance its market penetration in the stainless steel sector. Consequently, the total volume of EMM released this month is expected to trend upwards. Based on production surveys from manganese factories, an approximate output of 77,100 mt is forecasted for EMM output in August.
Silicon Metal
SMM data showed that the domestic silicon metal output stood at 282,800 mt in July, up 6.7% MoM and 11.3% YoY. From January to July 2023, the cumulative silicon metal production was 1.9781 million mt, with a YoY increase of 1.4%.
Entering the rainy season, Yunnan resumed production in batches from late June to early July. The operating rate doubled to around 80%, and the monthly output increased by more than 40,000 mt from June. The large-scale resumption of production by Yunnan silicon enterprises drove the national operating rate to rise. However, the other two main production areas, Xinjiang and Sichuan, saw different degrees of reduction. In Sichuan, power rationing in some areas and production restrictions during the Universiade have led to production stoppage in some factories.
In August, the operating rate in Yunnan reached a high level, and the affected production capacity in Sichuan gradually resumed. The major factories in Xinjiang have accelerated their maintenance progress and also have plans to resume production. The remaining idle production capacity in Xinjiang is also under the resumption plans. In terms of new production capacity, projects of Xinjiang GCL Green Energy Co., Ltd., and Ningxia East Hope New Energy Co., Ltd have resumed production during July and August. On the whole, the supply will rise steadily in August, output estimated at about 300,000 mt.
Polysilicon
According to SMM statistics, the total domestic polysilicon output reached 125,300 mt in July, an increase of 3.22% from June. The domestic polysilicon price fell below 60 yuan/kg in early July, causing some new capacity to be postponed. However, for first-tier companies, there was still a certain profit margin even at lower prices, so the production schedule of leading companies didn’t cut and their new capacity ramped up. Polysilicon prices showed signs of rebound in late July and demand improved, driving polysilicon stocks to fall. As such, the second - and third-tier enterprises' production enthusiasm was boosted.
PV module
According to SMM statistics, domestic PV module production in July was about 46.89GW, a 23.4% increase from June, after a decline in June. Improving profits in July fuelled the production enthusiasm of enterprises to a certain extent. With the arrival of large orders in July, module companies began to compete for market share. Top module companies maintained stable operating rate, while second- and third-tier companies actively increased production or even lowered prices to boost sales in July, resulting in a substantial increase in module output.
Solar cell
SMM data showed China’s solar cell output was 50.98GW in July, with P-type cell making up 80% and N-type cell making up the rest. Output of Topcon solar cell was 10GW, 19.62% of the total.
Production schedules of PV module producers were raised sharply in July, boosting demand for PERC182 solar cells and leaving it in short supply. Some small PV module producers failed to secure enough PERC182 solar cells. This drove up prices of PERC182 solar cells from 0.71 yuan/w to 0.75 yuan/w. Supply of PERC210 and Topcon182 solar cells was relatively ample, and their prices were stable. In the second half of July, trades in Topcon solar cells rose as some PV module producers began to stock up.
PV glass
According to SMM statistics, the total domestic output of photovoltaic glass in July reached 2.16 million mt, an increase of 4.40% from June. In July, some production lines that were put into operation earlier began to produce products normally. Domestic module demand increased at the end of July, thus module producers made inquiries for PV glass. July is longer than June, also contributing to higher output.

DMC
Statistics from SMM indicate that domestic production of DMC in July approximated at 197,100 mt, marking an impressive 27.24% surge month-on-month from June, and setting a new peak in the production volume over the preceding two years. As June ended, a total of six domestic DMC enterprises collectively resumed their operations, reflecting a combined capacity of 1.4 million mt. Following an increase in furnace temperatures and a successful trial production phase, these entities officially began product output in early July, resulting in a conspicuous rise in operational rates. Moreover, July saw only one DMC enterprise halting its operations for maintenance, which corresponds to an annual production capacity of 100,000 mt.. Forecasts for August hint at a modest decline in production, attributed to maintenance undertakings by a few DMC enterprises.
SiMn alloy
As reported by SMM, China's total output of SiMn alloy in July 2023 reached 949,000 mt, marking a month-on-month surge of 0.24% and a significant year-on-year leap of 39.34%. Between January and July 2023, the cumulative production of SiMn alloy in China approximated to 6.5411 million mt, reflecting a year-on-year growth of 5.25%.
The increment in SiMn alloy output this month can be primarily attributed to the robust operational rate in the Ningxia region. In contrast, some factories in Inner Mongolia underwent maintenance, marginally diminishing their production levels. In Guangxi, high electricity costs have led to a widespread phenomenon of production costs exceed the selling price, resulting in an upsurge in the number of companies curbing production or ceasing operations. Nonetheless, southern regions like Guizhou and Chongqing exhibited robust production performance.
On a broader perspective, the production growth in certain areas compensated for the decline in others. Coupled with the increase in the number of natural days in July, this resulted in an uptick in the overall national silicon-manganese production for the month.
Entering August, it is likely that certain furnace types within the Inner Mongolia region will continue to undergo maintenance. Additionally, there is potential for production cutbacks due to the implementation of dual energy consumption controls in Ningxia. As a result, we project a downturn in the total SiMn alloy output for August, with an estimated production of approximately 940,500 mt.

Magnesium ingot
According to SMM data, China's magnesium ingot output in July 2023 was 51,000 mt, a month-on-month decrease of 3.1%, and a year-on-year decrease of 26.48%. The cumulative output was 430,000 mt, a year-on-year decrease of 24.9%.
In July, the output of major domestic production areas was affected by semi-coke plant rectification and continued to run at a low level. At the same time, a factory in Xinjiang stopped operation for a month for maintenance and has now resumed production. The overall domestic output dropped by nearly 2,000 mt compared with the previous month. In addition, due to the hot summer, the output of single reduction furnace decreased slightly. And policies made the time for the resumption of production of magnesium plants in the main production area temporarily uncertain. In August, the main production area may maintain low output, and the domestic output is expected to be about 53,000 mt.
Magnesium alloy
According to SMM data, China's magnesium alloy output in July 2023 was 26,000 mt, a month-on-month increase of 1.2%, and a year-on-year decrease of 6.7%. The cumulative output was 181,000 tons, a year-on-year increase of 1.2%.
In July, some magnesium alloy factories’ sales staff said that overseas orders had picked up, but future orders were insufficient due to rising raw material prices, and the downstream market was generally weak. With the end of the summer break, overseas magnesium alloy orders are expected to continue to rise. It is expected that the output of magnesium alloys will increase slightly in August, standing at about 27,000 mt.

Magnesium powder
According to SMM data, the output of magnesium powder in China in July 2023 was 5,400 mt, a month-on-month increase of 14.5%, and the cumulative output was 38,000 mt.
In July, the magnesium powder market was highly active, and some factories had sufficient orders to maintain a full operation. The person in charge of a large magnesium powder factory said that except for a few large factories gaining good orders, the operating rate of other magnesium powder factories was still at a low level. Due to the recent fluctuations in raw material prices, the price disadvantage of magnesium powder over other alternatives has been further magnified. It is expected that China's magnesium powder output will remain low at about 5,100 mt in August.

Pr-Nd Oxide
In July 2023, domestic production of Pr-Nd oxide was 6,064 mt, a decrease of 2% MoM. The reduction in Guangdong was more obvious, and the output in other regions fluctuated less than in June.
According to SMM research, due to equipment instability of some separation plants in Guangdong after relocation, the normal production of oxides in July was disturbed and the local output in July decreased by 64% month-on-month. Although the Universiade was held in Sichuan, the shutdown time in July was relatively short, so the output has not been significantly reduced. However, according to the report of the local separation plants, its suspension is expected to continue until mid-August, so it is expected that a drastic output reduction in Sichuan may occur in August.

Pr-Nd Alloy
In July 2023, domestic production of Pr-Nd alloy was 5,082 mt, a decrease of 4% MoM. The reduction in Zhejiang and Sichuan is more obvious, and the output in other regions fluctuates less than in June.
According to SMM, some factories in Zhejiang were relocated, so production shrank recently. The production of those factories is expected to resume in September. Therefore, the output in the Zhejiang area decreased by about 8.6% month-on-month. Due to the Universiade opening in Sichuan, the local factories need to respond to the call for energy conservation and emission reduction, causing the output in Sichuan to be down 22% from the previous month.

Pr-Nd Oxide
In July 2023, domestic production of Pr-Nd oxide was 6,064 mt, a decrease of 2% MoM. The reduction in Guangdong was more obvious, and the output in other regions fluctuated less than in June.
According to SMM research, due to equipment instability of some separation plants in Guangdong after relocation, the normal production of oxides in July was disturbed and the local output in July decreased by 64% month-on-month. Although the Universiade was held in Sichuan, the shutdown time in July was relatively short, so the output has not been significantly reduced. However, according to the report of the local separation plants, its suspension is expected to continue until mid-August, so it is expected that a drastic output reduction in Sichuan may occur in August.

Dysprosium oxide
In July 2023, the domestic output of dysprosium oxide was 195 mt, a decrease of 3.6% from the previous month. The reduction was mainly reflected in the regions of Jiangxi and Guangdong.
According to SMM, due to the equipment adjustment and factory relocation of enterprises in the Guangdong area, the unstable production situation of equipment led to the production capacity not reaching the normal level in July. Due to the severe losses, the operating rate of some waste recycling enterprises in Jiangxi were reduced in July. The output of dysprosium oxide in Guangdong decreased by 50% from June, and that in Jiangxi dropped by 18% from the previous month.

Terbium oxide
The domestic output of terbium oxide in July 2023 was 39.7 mt, a decrease of 6.8% month-on-month, and the output in Guangdong and Jiangxi decreased significantly.
According to SMM statistics, after the separation factories’ relocation, new equipment was still being debugged, so the production situation in July was unstable, hence affecting the production capacity to a certain extent. Some waste recycling enterprises in the Jiangxi area saw a more obvious decline in output due to severe losses. Besides, the output of terbium oxide in Guangdong decreased by 50% month-on-month, and that in Jiangxi fell by 8.3% month-on-month.

Molybdenum Concentrate
Based on partial statistics from SMM, China produced approximately 16,500 mt of molybdenum concentrate in July 2023, reflecting a month-on-month decrease of 1.2%. It has been noted that in July, due to the strong demand for molybdenum concentrate in downstream industries, most molybdenum mining companies maintained a high operational level, often operating at full capacity, thus ensuring overall output stability.
Currently, the available inventory of molybdenum concentrate in the market is somewhat low, and there is a significant demand for molybdenum concentrate among molybdenum smelting enterprises. This has led to a tight supply situation in the overall market. Consequently, SMM predicts that the production of molybdenum concentrate will likely stay consistent in August.
Ferro-molybdenum
According to incomplete data gathered by SMM, China's ferro-molybdenum production for July 2023 was approximately 15,800 mt, marking a near 4% decrease from the previous month. This reduction in ferro-molybdenum production can be primarily attributed to two factors:
Firstly, with molybdenum prices remaining at a high level, ferro-molybdenum smelters have been particularly careful in managing their cost risks. As a result, some manufacturers have decided to operate at only 50% to 70% of their full capacity to mitigate the risk of costs exceeding sale prices.
Secondly, the drop in production can also be attributed to scheduled maintenance in some smelting factories during July, which inevitably led to the overall decrease in ferro-molybdenum output.
Looking forward to August, factories that were previously under maintenance have now resumed production, while others have scheduled production cuts. As such, SMM anticipates that overall shifts in ferro-molybdenum production in August will be minimal, although a slight increase could be possible.
Silver
As per SMM's statistics, the recorded production of Grade 1# silver in China for July 2023 stood at 1,350.304 mt, of which 992.304 mt were derived from silver mines. This marked a 1.6% decrease month-over-month, and a 2.2% decrease year-over-year. The reasons for this month-over-month reduction are as follows:
Scheduled maintenance at certain smelting factories; High silver prices resulting in a strong inclination to dispatch raw materials, with some downstream buyers rejecting these prices;
A shortage of imported high-grade silver ore, making procurement more challenging; A halt in dispatching;
Conversely, the reasons behind the increased production by some enterprises include: Completion of maintenance leading to a resumption of production; High silver prices prompting a strong willingness to dispatch raw materials, with downstream buyers agreeing to these prices and accepting the goods.
Given that the decrease in silver production by some enterprises outpaced the increase by others, overall silver production saw a month-on-month decline in July.
Due to the silver prices in July of this year exceeding those of the same period last year, the market price for silver raw materials rose correspondingly. In comparison to the previous year, downstream entities exhibited a weaker capacity to accept raw materials, leading to a year-on-year reduction in production.
Macroeconomic：
Negative indicators: The ADP Employment Report for July in the U.S. recorded 324,000 jobs, a figure that fell short of the prior count of 497,000 jobs, but surpassed the anticipated 189,000 jobs. Additionally, the U.S. unemployment rate for July was reported at 3.5%, lower than both its previous rate and the forecasted rate of 3.6%.
Positive indicators：The U.S. Non-farm Payroll figures for July, adjusted seasonally, were reported at 187,000 jobs, a number that was below both the previous figure of 209,000 jobs and the expected figure of 200,000 jobs.
Given the potency of the negative data and information, a considerable downward pressure was felt in early July.

Antimony Ingots
Based on SMM's research and statistics, the production of antimony ingots in China for July 2023 — which encompasses antimony ingots, crude antimony equivalents, and cathode antimony — amounted to 8,038 mt. This represents a month-on-month increase of 5.35%. Customs data reveals that from January through June of this year, the import volume of other forms of antimony ore and their concentrates touched 21,145 mt. This figure is markedly higher than the 13,442 mt seen during the corresponding period last year. If this momentum persists, the annual import volume of antimony ore could revert to around 40,000 mt. Numerous market observers anticipate that if this trend sustains, the provision of imported antimony raw materials might return to a more relaxed state. Currently, many market insiders have noted an increase in suppliers’ eagerness to dispatch their stocks, indicating a robust inclination towards selling on the part of suppliers.
Assessing the production trends from July, it is evident that many manufacturers have progressively ramped up their operations, returning to normal or resuming production. However, there have also been sporadic instances where some manufacturers have had to cease or scale down their production. To provide more detail, amongst the 33 manufacturers that SMM investigated, 11 have paused their production - an uptick of one from the previous month. Additionally, 13 manufacturers have reported a contraction in output, which is one less compared to the previous month. On the other hand, the production levels of 9 manufacturers have remained stable, mirroring last month's figures. SMM projects that in August 2023, as mineral resources increase, the national production of antimony ingots is likely to sustain its current level, particularly amongst the larger manufacturers. An uptick in production is likely.
Refined bismuth
Based on SMM's comprehensive survey of national bismuth manufacturers, China's refined bismuth production in July 2023 saw a substantial drop of 19.13%, reaching 1,955.59 mt. Multiple factors contributed to this downturn in July's refined bismuth production.
One prominent factor is the recent scarcity of bismuth raw materials in the market, which made it considerably challenging for manufacturers to secure bismuth resources at an affordable price. This situation is best exemplified by the bismuth concentrate auction by Hunan Shizhuyuan Nonferrous Metals, which attracted a high bid.
Furthermore, the commencement of a new round of environmental inspections in July by the Environmental Protection Inspection Group affected several areas, including Hunan and other regions such as Shaanxi. These inspections resulted in a series of production reductions, and in some cases, complete shutdowns by some bismuth producers. Adding to this, a number of refined bismuth smelting manufacturers initiated a period of production decreases and maintenance since summer's onset. These combined factors led to a significant reduction in bismuth production in July, which consequently bolstered the strong pricing of bismuth.
From a demand perspective, there was little fluctuation in the requirements from various downstream sectors, with the overall essential demand remaining relatively stable. There is a noticeable resurgence in the inclination to stockpile from the end-users and in purchases made by speculative funds. Some manufacturers also indicated that due to the obligation to fulfill long-term orders and the decline in production owing to cutbacks and closures, they were compelled to procure refined bismuth resources from the market. Hence, based on the present fundamental analysis, the supply and demand dynamics of domestic refined bismuth are poised to undergo changes in the short-term, which will likely provide support and drive for bismuth prices.
Silver nitrate
China witnessed a substantial month-on-month growth in silver nitrate production in July. Domestic producers with sales qualifications accounted for 781 mt, representing a 22.8% increase from the previous month. Given that this surveyed output constitutes approximately 80% of the market, we infer that the total domestic production of silver nitrate in July was about 976 mt.
Every domestic silver nitrate enterprise reported an uptick in production in July. This was primarily attributed to the low and unstable silver prices at the beginning of July, influenced by the hawkish stance from the Federal Reserve, backed by robust employment data from late June. Simultaneously, market anticipation of mid-July's CPI data indicated a potential decrease in inflation. This reduced the urgency for the Fed to hike interest rates, leading to a boost in silver prices and prompting downstream businesses to buy at lower prices and place large orders with upstream providers. July's production figures include some deliveries from orders placed at the end of June when silver prices were still relatively low. This situation, coupled with the support of silver prices, led to an increase in downstream order placement, resulting in a notable month-on-month increase in silver nitrate production.
Although silver prices continue to fluctuate in August, according to SMM, there's a heightened sense of caution in the downstream market, likely due to significant stockpiling in July. Consequently, SMM anticipates that the silver nitrate production in August will remain steady.
Titanium dioxide
According to SMM data, China's titanium dioxide output reached 310,000 mt in July 2023, marking an 8.1% increase month-on-month, but a decline of 4.8% year-on-year. The total production for the first seven months of this year stood at 2.2 million mt, representing a year-on-year decrease of 5.3%.
July saw a positive trend in the operation of domestic titanium dioxide enterprises. Spurred by the fourth wave of price hikes within the country, these businesses exhibited high levels of operational zeal, and companies that had previously reduced production resumed full operations. Consequently, the aggregate output rose by 20,000 mt from the previous month. Considering the current operational conditions of titanium dioxide enterprises, market orders have seen a slight recovery month-on-month, with certain product types experiencing shortages. It is projected that the upward trend in domestic titanium dioxide production will persist into August, with an estimated output of around 320,000 mt.
APT
Based on partial data collected by SMM, the production of ammonium paratungstate (APT) in China for July 2023 approximated to 11,100 mt. This marked a 3.7% decline compared to the previous month. During July, amidst steadfast costs and dwindling demand, APT smelters still suffered losses. This led to a decrease in enthusiasm towards production among smelting plants, compelling some small-scale private smelters to halt operations for maintenance. Further, due to factors such as environmental and safety concerns, certain smelting plants were forced to suspend operations and are yet to resume normal production, resulting in a minor drop in APT production.
Entering August, with the tungsten market still in its off-season, smelting plants are focused solely on maintaining stable output for long-term contracts, with less stock available for immediate transactions. Consequently, APT production is projected to remain steady in August.
Lithium carbonate
In July, China's lithium carbonate output was 45,314 mt, an increase of 10% MoM and 49% YoY. Despite maintenance by some smelters, output of lithium carbonate produced with spodumene rose thanks to growing raw material supply. While natural gas pipeline maintenance disrupted output, others resumed production after being affected by environmental protection checks or ramped up new capacity, driving output of lithium carbonate produced with lepidolite to grow significantly. In terms of salt lake enterprises, seasonal factor and ramp-up of new capacity sustained output growth. As for smelters who use scrap as raw material, their capacity continued to ramp up and technical upgrades also contributed to output growth. With ramp up of new capacity, the overall operating rates will keep growing this month. The lithium carbonate output in August is expected to be 46,701 mt, an increase of 3% MoM and 56% YoY.
Llithium hydroxide
In July, China's lithium hydroxide output was 26,636 mt, a MoM increase of 3% and a YoY increase of 34%. The steadily falling lithium hydroxide prices diminished the cost performance of lithium hydroxide produced with industrial grade lithium carbonate, thus smelters reduced output. Yet, the decline was offset by output release from new capacity at other smelters.
With arrivals of imported ore, capacity that was delayed will be put into operation in August. It is estimated that the output of lithium hydroxide in August will be around 26,711 mt, an increase of 0.3% MoM and a YoY of 54%.

Cobalt sulphate
Domestic cobalt sulphate output stood at 8,391 mt in metal content in July, up 12% MoM and a growth of 33% YoY. Cobalt sulphate output totalled 49,683 mt in metal content from January to July, up 18% YoY.
On the supply side, bolstered by the news of central government purchasing refined cobalt as national reserves, cobalt prices trended higher in mid-to-early July, largely widening the gap to cobalt salts, thereby pushing up offers for cobalt salts. In addition, profits of cobalt sulphate were good. Under such circumstance, the operating rate of cobalt salt makers moved up. On the demand side, a rapid rise in cobalt prices fuelled higher buying appetites from downstream buyers, boosting enthusiasm for inquiries. Therefore, cobalt was overbought to a certain extent. In late July, with cobalt price retracing down, and social inventory of cobalt salt was high. However, the operating rate of cobalt salt companies remained high due to orders received earlier. Inventory of cobalt salt factories increased since mid-to-late July.
Ternary cathode precursor makers may keep production stable in August, except for a certain increase in the leading precursor manufacturers. The overall ternary cathode precursor makers will still consume the previous inventory, and demand will be weak. On the supply side, weak order intakes, cobalt price erosions and profit dips will lead some smelters to lower scheduled production. China’s cobalt sulphate output may be 8,212 mt in metal content in August, down 2% MoM but up 28% year on year.

Tricobalt tetraoxide (Co3O4)
In July, China's tricobalt tetraoxide (Co3O4) production registered at 7,230 mt, representing an 8% contraction month-on-month, yet exhibiting a substantial year-on-year increase of 71%. The cumulative output of Co3O4 from January to July amounted to 41,217 mt, reflecting a 6% decrease compared to the same period last year.
On the supply front, Co3O4 production experienced a downturn in July relative to June. This can be attributed to the off-peak demand season for digital requirements during July and August, combined with extensive restocking carried out by downstream LCO companies prior to this period. The cobalt salt prices took a dip starting from mid-July, fostering a heightened sense of caution among LCO entities. Due to a slump in downstream orders, some Co3O4 producers scaled down their output.
Looking towards August, the demand-side analysis reveals an unimproved high-voltage LCO market, with no visible growth in the e-cigarette market. Certain LCO companies have already ceased production and Co3O4 companies have been bolstering their stockpiles since late July, with overall production schedules tapering off in line with downstream demand. The projected Co3O4 output for August is set at 6,630 mt, marking an 8% decrease month-on-month but witnessing a 34% surge year-on-year.

Ternary cathode precursor
In July, the production of ternary cathode precursors in China reached 78,724 mt, marking a 6% increase month-over-month and a 14% increase year-over-year. From January to July, the cumulative output stood at 446,154 mt, reflecting a year-on-year growth of 4%.
The surge in July's output was primarily driven by the industry's leading enterprises, with robust downstream demand for mid-to-high nickel products pushing up operational rates. In contrast, other precursor firms witnessed a marginal month-over-month decline in output for July, with some experiencing a slight downturn post a mid-year spike in June. Internationally, certain cathode firms reduced their high-nickel requirements due to cost-cutting measures. Coupled with summer holidays and prior stockpiling, the demand softened, leading some precursor firms to lower exports and production.
As August began, the influence of leading ternary cathode precursor firms became more pronounced. Owing to their competitive pricing and technological prowess, these firms saw an uptick in demand for specific downstream products, hence further escalating operational rates. However, smaller precursor firms faced a slump in downstream orders, resulting in a steady but slightly weakening production schedule.
In August, the production of ternary cathode precursors in China is projected at 82,648 mt, a 5% increase month-over-month and a 3% increase year-over-year.
Ternary cathode materials
In July, China's production of ternary cathode materials modestly rose by 3% month-over-month and year-over-year, totaling 56,967 mt. In the power battery sector, while the overseas market remained sluggish, domestic demand experienced a slight rebound, leading to an incremental increase in total power battery orders. From the consumption perspective, the traditional off-season, coupled with substantial prior stockpiling and falling lithium prices, resulted in a gradual decrease in downstream procurement orders. Driven predominantly by the power battery demand, the operation rate of ternary cathode materials production experienced a slight uptick. Notably, the effect of order concentration at top-tier manufacturers was significant, leading to stable or increased operations, while small- and medium-sized enterprises either maintained their output or slightly declined. In terms of series, primarily influenced by end-user demand, the proportion of Series 5 ternary cathode materials experienced a minor decline, while Series 6 and 8 saw a slight increase.
Heading into August, the decline in lithium prices accelerated. Given the strong downward expectations in consumer orders and the steady performance of the power battery sector, a slight decrease in the operation rate of ternary cathode materials production was anticipated. In August, China's production of ternary cathode materials may amount to 55,017 mt, marking a 3% decrease month-on-month and a 6% drop year-on-year.
From January to July, the cumulative production of ternary cathode materials in China reached 344,441 mt, reflecting a 1% increase year-on-year.

Iron phosphate
China produced 122,000 mt of iron phosphate in July, down 1.6% MoM and up 76.5% YoY. In terms of the market, LFP producers refilled a small amount of iron phosphate in the first half of July, but purchased less raw materials and consumed their stocks in the second half of the month, owing to falling lithium carbonate prices. Feeling impact of weaker-than-expected replenishing demand from LFP, the production and sales of iron phosphate inched lower in July. In terms of costs, in phosphorous chemical market, phosphoric acid prices hiked, so did prices of ferrous sulphate and hydrogen peroxide. Therefore, the overall costs edged higher by 300-500 yuan/mt.
In August, power rationing may linger. Battery cell manufacturers postponed pick-up of goods, leading to moderate production enthusiasm of downstream LFP makers. It is estimated that the output of iron phosphate in August will reach 120,400 mt, down 1.3% MoM and up 58% YoY.

LFP
In July, China's LFP production amounted to 138,890 mt, reflecting a month-on-month change of -1.6% and a year-on-year increase of 49.7%. Output for January-July rose 54.99% YoY. On the cost side, the price of the main raw material, lithium carbonate, continuously declined in the latter half of July, while the price of iron phosphate remained stable, thereby leading to a decrease in production costs.
On the supply side, considering the potential impact of high-temperature and power restrictions at the end of July, some companies modestly increased their inventory. However, as the price of lithium carbonate fell, battery factories prolonged their procurement timelines, and LFP enterprises reduced production volumes. Overall, this resulted in a slight decrease in supply.
In terms of demand, due to the decline in raw material prices, battery enterprises displayed a tendency to buy more when prices kept rising and hold off when prices were in downward trend, leading to a stronger wait-and-see sentiment. In August, the risk of high-temperature and power restrictions continues to be present, causing downstream and end-user supply and demand to be lower than expected.
It's projected that LFP production in August 2023 will be approximately 133,450 mt, signifying a slight month-on-month decrease of 3.9%, yet a year-on-year increase of 47.5%.

LCO
In July, China's lithium cobalt oxide (LCO) production registered at 6,673 mt, experiencing a contraction of 13% compared to the previous month, while showcasing an 18% surge on a year-on-year basis. After a mid-year production ramp-up, LCO cathode manufacturers witnessed a downturn in their total output for July relative to June. Yet, it's notable that the production concentration among industry-leading entities remained high, showing marginal divergence from June's data. Triggered by considerable price fluctuations in upstream raw materials during July, these LCO cathode producers embarked on a strategic path to minimize their inventory holdings, thereby mitigating associated risks.
From a demand perspective, digital requirements in July were relatively subdued, leading to a dampened purchasing intent among downstream battery factories. These entities clung to long-term contracts, with spot orders being on the lower side. Furthermore, they aligned their procurement of cathode materials with sales orders, which resulted in increased procurement frequency, but each with a smaller volume.
Looking ahead, the digital market is projected to maintain its lukewarm trend in August. The typical surge in consumer market driven by the back-to-school season was absent this year, failing to create a demand spike. However, the launch of new products in September might breathe life into the LCO market. Production in August is anticipated to scale down from July, with a forecasted output of 6,398 mt, marking a 4% decrease month-on-month but achieving a 13% increase year-on-year.

LMO
In July 2023, the production of lithium manganese oxide (LMO) in China reached 10,072 mt, marking a month-on-month decrease of 31% but a year-on-year surge of 85%. Over the month, LMO operations confronted dual challenges arising from both the raw material and demand sectors, consequently leading to a downward shift in the operational rates of companies. In terms of raw materials, lithium carbonate broadly maintained a subtle downward trend in July, continually undermining the cost support for LMO. This resulted in downstream battery cell manufacturers exercising increased prudence while procuring LMO cathodes. As for the demand sector, July represents a period of subdued demand for consumer electronics. Moreover, the aftermath of prior explosion incidents prompted the Guangdong Market Supervision Bureau to impose light inventory management on battery companies. These factors have exerted a substantial impact on LMO demand. Given that some LMO companies still had prior fixed orders to fulfill in July, the reduction in production was not overly drastic. Nevertheless, the challenges from both the raw material and demand sectors are likely to persist into August, with the anticipated LMO production projected to be approximately 7,526 mt, signifying a month-on-month contraction of 25% but a year-on-year ascent of 32%.