Approaching the Spring Festival, with demand outlooks dimming and losses, manufacturers will reduce early to mid-January production, fulfilling long-term contracts. Production will taper off later, with deliveries from prior stocks. The market is bracing for a production halt and maintenance during the Spring Festival, anticipating a supply drop. Lithium hydroxide inventories dropped to 25,300 mt in December, down 4,054 mt (14%) MoM as production fell and some smelters sold off stock and converted lithium hydroxide into lithium carbonate for sale. This faster de-stocking indicates easing in the previously oversupplied market.
Demand side, January's traditional new energy vehicle sales lull sees high-nickel cathode producers brought forward their scheduled production due to February's planned reductions and maintenance, boosting lithium hydroxide procurement and pickup. At the same time, Red Sea route disruptions and longer China-Europe shipping have prompted some foreign firms to slightly stockpile before the Spring Festival, supporting upstream lithium hydroxide demand. Downstream cathode producers remain cautious in procurement, yet the outlook is now more positive than earlier market expectations.
Looking at the supply, demand, and price dynamics, the lithium hydroxide surplus is likely to continue short-term. Yet, with overseas spodumene concentrate prices nearing miners' production costs, firms may increasingly seek to hold prices, potentially offering incremental cost support for lithium hydroxide. Moreover, with lithium hydroxide smelting slowing for the Spring Festival and high-nickel cathode makers advancing production, the industry's de-stocking persists. This supply-demand improvement could keep lithium hydroxide prices weak but steadily lessening in decline through January.
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