Exclusive: SMM China Metals Production In May And Forecast For June 

Copper cathode
SMM data showed that China's copper cathode output in May was 1.0086 million mt, up 23,500 mt or 2.39% MoM, and up 5.19% YoY, exceeding the expected 977,100 mt by 31,500 mt. The output once again surpassed the 1 million mt mark, setting a new monthly high for the year. The cumulative output from January to May was 4.9133 million mt, up 272,000 mt YoY, an increase of 5.86%.
The main reasons for the higher-than-expected output in May are as follows: 1. The historical high copper prices in May widened the price difference between copper cathode and copper scrap, significantly increasing the supply of blister copper and copper anode, as reflected by the continuous rise in RCs for blister copper and processing fees of anode plates (as of May 31, SMM's domestic blister copper RCs in south China reported at 2,100 yuan/mt, up 600 yuan/mt MoM; domestic anode plate processing fees reported at 1,400 yuan/mt, up 200 yuan/mt MoM); some smelters even directly purchased copper rod made from copper scrap as raw material to ensure output. 2. The ample raw materials significantly reduced maintenance at smelters. According to SMM, the impact from maintenance on output at several smelters weakened due to sufficient anode plate procurement. 3. The rapid commissioning of a smelter in south-west China also contributed to the higher-than-expected total output. In summary, SMM believes that the overall operating rate of the copper cathode industry in May was 88.46%, up 2.01 percentage points MoM; the operating rate of large smelters was 92.42%, up 1.44 percentage points MoM, the operating rate of medium-sized smelters was 84.21%, up 2.94 percentage points MoM, and the operating rate of small smelters was 69.40%, up 2.92 percentage points MoM.
Entering June, many smelters are still scheduled for maintenance. According to SMM statistics, eight smelters will undergo maintenance, involving a total smelting capacity of 1.56 million mt, which is the main reason for the expected decline in output in June. Additionally, the current negative spot TCs for copper concentrate (as of May 31, SMM's Imported Copper Concentrate index reported at -$0.97/mt, down $5.09/mt MoM). Some smelters, unable to procure enough anode plates to make up for the copper concentrate shortfall, will have to reduce their operating rates in June. The copper price fell from highs in mid-to-late May, narrowing the price difference between copper cathode and copper scrap and thus reducing the supply of copper scrap and anode plates. Output at some smelters fell due to decreased raw material replenishment.
Based on the production schedules of various enterprises, SMM expects domestic copper cathode output in June to be 985,000 mt, down 23,600 mt MoM, or a decrease of 2.34%, and up 67,100 mt YoY, or an increase of 7.31%. The cumulative output from January to June is expected to be 5.8983 million mt, up 339,100 mt or 6.1% YoY. The overall operating rate of the copper cathode industry in June is expected to be 86.54%, down 1.92 percentage points MoM; the operating rate of large smelters is expected to be 89.86%, down 2.46 percentage points MoM, the operating rate of medium-sized smelters is expected to be 82.04%, down 2.17 percentage points MoM, and the operating rate of small smelters is expected to be 74.66%, up 5.25 percentage points MoM. Only a few smelters are scheduled for maintenance in July, and the output is expected to rise further in July.

Aluminium
According to SMM statistics, in May 2024 (31 days), domestic aluminium production reached 3.637 million mt, up 4.61% YoY. In May, aluminium plants in Yunnan maintained resumption, and an aluminium plant in Inner Mongolia fully resumed production capacity, driving aluminium production in May. However, the proportion of aluminum liquid saw a slight pullback due to the reduction in aluminum billet production, down 0.7 percentage points MoM and down 2.3 percentage points YoY to around 73.27%. Based on SMM's aluminum liquid proportion data, the domestic aluminium ingot volume in May increased by 14.24% YoY to approximately 971,000 mt.
Changes in production capacity: As of the end of May, SMM statistics showed that the existing capacity of domestic aluminium was approximately 45.19 million mt, and the operating capacity of domestic aluminium was about 42.961 million mt, with the industry's operating rate increasing by 5.01 percentage points YoY to 95.06%. The increase in operating capacity in May mainly comes from the gradual resumption of production in Yunnan. Currently, the improvement in power supply in Yunnan, together with high aluminium prices, stimulated the second round of production resumption in local smelters. As of June 7, the annualized operating capacity in Yunnan is around 5.45 million mt, up about 300,000 mt MoM, with the remaining capacity expected to be fully resumed by the end of June. Additionally, a smelter in Inner Mongolia, which had previously halted production due to a malfunction, has resumed production, contributing to the domestic aluminium operating capacity in May.
Production Forecast: In June 2024, the domestic aluminium operating capacity is expected to mainly rebound, mainly due to the steady recovery of power supply in Yunnan, with the remaining capacity steadily resuming production. Additionally, the new project of Huayun Phase III in Inner Mongolia is expected to continue its commissioning. The installed capacity in June is expected to increase to 45.36 million mt. Considering the capacity changes in other regions, SMM expects the annualized domestic aluminium operating capacity to increase by approximately 300,000 mt MoM to 43.27 million mt by the end of June, with a monthly production of around 3.54 million mt (30 days). Furthermore, in May, billet factories in Guangxi ceased production due to losses, which increased the ingot volume of local aluminium plants. According to the SMM survey, the production of aluminum billets in Guangxi resumed, and the domestic aluminium ingot production is expected to adjust in June, with the industry’s aluminum liquid ratio rebounding to 75%. We need to pay attention on the resumption of aluminium smelters in Yunnan and the operating rate of downstream aluminum liquid users such as billet factories.

Alumina
According to SMM data, China's metallurgical-grade alumina production in May (31 days) was 6.989 million mt, with an average daily output increasing by 10,400 mt/day from April to 233,000 mt/day. The total output in May increased by 4.64% MoM and 4.59% YoY. As of the end of May, China's existing alumina capacity was 100 million mt, with an operating capacity of 82.29 million mt, and an operating rate of 82.3%. From January to May 2024, domestic metallurgical-grade alumina production totaled 33.451 million mt, up 3.42% YoY.
By region, in Shanxi, the operating rate in May was 75.8%, up 2.9% from April, mainly due to a medium-sized alumina refinery in Shanxi reducing production in March due to insufficient ore supply, and gradually resuming normal production in May, involving an annual capacity of 550,000 mt. Additionally, an alumina refinery in Lvliang resumed full production by the end of May as domestic captive mines resumed, involving an annual capacity of 450,000 mt. In Henan, the operating rate in May was 66.1%, up 3% from the previous month, mainly due to a local alumina refinery resumed a production line in early May as ore supply pressure eased, involving an annual capacity of about 500,000 mt. In Guizhou, the operating rate in May decreased by 2.6% from April to 80.8%, mainly due to an alumina refinery undergoing equipment maintenance in early May, affecting a capacity of about 400,000 mt, and gradually resuming production, with the operating capacity increasing to around 900,000 mt by the end of May. In Hebei, alumina refineries further contributed to the increase in alumina production in May, with the operating rate rising by 7% from April to 95.7%. In Guangxi, the operating rate in May rose slightly by 2.6% from April to 88.4%, mainly due to an alumina refinery in Guangxi resuming production to 500,000 mt in May after a suspension in early April due to ore supply issues. In Shandong, the operating rate in May was relatively stable, rising slightly by 0.7% from April to 93.2%.
June forecast: According to the SMM survey, some bauxite mines in Shanxi and Henan resumed production in May. Some mines in Shanxi reported that they are actively promoting production resumption. An alumina refinery in Shanxi restored its operating capacity to full production by the end of May. An alumina refinery in Henan increased its production by 300,000 mt in late May due to the supplementation of some imported ores and plans to further increase production by 200,000 mt to full capacity. An alumina refinery in Shandong completed its roasting maintenance in late May, and its operating capacity is expected to increase. In Guizhou, about 300,000 mt of capacity is still pending for resumption. Therefore, domestic alumina production in June is expected to further increase. However, due to the large-scale suspension of bauxite mines in Shanxi and the lack of specific resumption plans for open-pit bauxite mines in Sanmenxia, Henan, the short-term bauxite production in Shanxi and Henan may not see substantial increases. The increase in alumina supply in Shanxi and Henan is limited. SMM expects the average daily output in June 2024 to be 229,500 mt/day, with a total operating capacity of around 83.76 million mt, up 6.6% YoY.

Overseas aluminium
According to SMM statistics, the total overseas aluminium output in May 2024 (31 days) was 2.5079 million mt, up 1% YoY. As of 2024, the cumulative output reached 12.287 million mt, up 1.2% YoY. The capacity utilization rate of overseas aluminium was 86.4%, flat MoM, up 1.1% YoY.
By region:
North America: The output in May was 335,000 mt, down 2.3% YoY. The decline in output was mainly due to the complete shutdown of the New Madrid smelter in March 2024.
South America: The output in May was approximately 130,000 mt, up 6.4% YoY. The Alumar smelter (60% owned by Alcoa, 40% by South32) announced the production resumption in April 2022, with the capacity utilization rate recovering to about 69% in May, and the output in May was approximately 26,000 mt. Additionally, the Brazilian market demand improved compared to the same period last year, with Companhia Brasileira de Aluminio's aluminium output up 7% YoY to about 30,000 mt, with a capacity utilization rate of about 80%.
Russia: The aluminium production for May was approximately 351,300 mt, up 3.1% YoY. The growth mainly came from the resumption of the Taishet smelter. SMM estimates the smelter's May production to be around 20,000 mt, with the capacity utilization rate resuming to about 55%.

Africa: The production was approximately 133,000 mt in May, down 2.1% YoY. This decline was due to short-term equipment upgrades at the Mozal smelter, which affected part of the capacity. South32 said that this short-term factor would not impact the annual production.
India: The production increased by 1.8% YoY to 350,000 mt in May. The Vedanta Jharsuguda smelter's monthly production increased by 5% YoY to 155,000 mt.
Other regions in Asia excluding China, India, and the Middle East: The production saw a significant increase in May, up 5.7% YoY to 176,000 mt. The main growth came from Indonesia. The Huaqing Aluminium smelter in Indonesia started operations in 2023, with a production capacity of 500,000 mt in 2024. SMM estimates the smelter's production in May to be around 22,000 mt, with a capacity utilization rate of about 53%.
June forecast: According to SMM statistics, the overseas aluminium production in June 2024 (30 days) is expected to be approximately 2.427 million mt, up about 0.9% YoY, with the capacity utilization rate remaining flat MoM and slightly increasing by 1% YoY.

Overseas Metallurgical Grade Alumina
In May 2024 (31 days), the production of overseas metallurgical grade alumina was approximately 4.88 million mt, up 1.8% YoY. The global alumina capacity utilization rate was 80.2%, up 0.1% MoM, but down 0.1% YoY. The cumulative production from January to May 2024 reached 24.036 million mt, up 2.1% YoY.
By region:
Australia: The production for May was 1.527 million mt, down 5.2% YoY. The decline mainly came from Alcoa's Kwinana refinery and Rio Tinto's Yarwun refinery. Alcoa announced at the beginning of 2024 that the Kwinana alumina refinery would completely shut down by the end of the year, with May production down about 34% YoY and the capacity utilization rate dropping to around 44%. Additionally, a natural gas pipeline explosion in Queensland in March 2024 affected Rio Tinto's Gladstone operations, with the Yarwun alumina refinery's capacity utilization rate at about 73%.
South America: Production increased by 9.6% YoY to 955,600 mt, mainly contributed by Brazil's Alumar alumina refinery. The refinery underwent maintenance shutdown in Q2 2023 and resumed normal production in Q3. In May 2024, the production was approximately 300,000 mt, with a capacity utilization rate of about 93%.
India: In May, output increased by 6.9% YoY, mainly from Vedanta's alumina refinery in Lanjigarh. Vedanta announced in early April 2024 that the plant's capacity would be increased from 2 million mt to 3.5 million mt, with plans to expand to 5 million mt in the future. SMM estimates that the plant's May output increased by 43,000 mt YoY and expects further growth in the future.
Indonesia: Production capacity is growing rapidly, with April output up 22.2% YoY. This is mainly due to the capacity expansion of Nanshan Aluminum's alumina refinery on Bintan Island, Indonesia. An SMM survey shows that the plant, which started production in 2022 with a capacity of 1 million mt, plans to add another 2 million mt in 2024. Current output is close to the nameplate capacity, with April output up 53% YoY.
June forecast: According to SMM statistics, the total overseas metallurgical-grade alumina output in June 2024 is expected to be 4.7266 million mt, up 1.7% YoY. The average capacity utilization rate is about 81%, flat MoM, and slightly down by 0.2% YoY.

Primary Lead
In May 2024, the domestic output of primary lead was 288,800 mt, down 0.93% MoM and down 6.8% YoY. The cumulative output from January to May 2024 was down 4.87% YoY. The total capacity of surveyed enterprises in 2024 was 6.0063 million mt.
The production of large smelting enterprises in Henan resumed. That, together with the recovery of smelting enterprises in Hunan and Yunnan after maintenance, brought an output increase of over 10,000 mt. Meanwhile, smelting enterprises in Yunnan, Hunan, and other regions started maintenance. The lead concentrate TC hit a new low, leading to a decline in crude lead RCs. Raw material supply issues constrained production, also bringing a reduction of over 10,000 mt in output. The output in May was in line with our forecast.
In June, based on the production plans of major enterprises, the output of primary lead is expected to remain relatively stable compared to May. Smelting enterprises in Henan, Anhui, and Inner Mongolia plan to undergo maintenance in early, mid, and late June, respectively, which is expected to affect over 10,000 mt of primary lead output. Meanwhile, smelting enterprises in Yunnan, Hunan, and Henan will resume production after maintenance, and with lead prices showing a strong fluctuation, the production enthusiasm of smelting enterprises is strong. However, due to the limitations of lead concentrate supply, the recovery of these enterprises can only make up for the reduction in output. Overall, SMM expects the output of primary lead in June to remain at 288,000 mt.

Secondary Lead
In May 2024, the output of secondary lead was 320,600 mt, down 14.37% MoM and down 16.9% YoY; the cumulative output of secondary lead from January to May 2024 was 1.6035 million mt, down 8.35% YoY. In May 2024, the output of secondary refined lead was 267,800 mt, down 18.11% MoM and down 19.89% YoY; the cumulative output of secondary refined lead from January to May 2024 was 1.3691 million mt, down 9.54% YoY.
In May, the production of many small and medium-sized smelters improved compared to April, and the resumption of production at Anhui Huaxin and Hebei Xiongtai Recycling Resources contributed to the increase in refined lead output. However, due to raw material shortages, equipment failures, routine maintenance, and environmental protection issues, large secondary lead smelters in Anhui, Hunan, Guangxi, and Jiangxi reduced or halted production, leading to a significant decline in refined lead output. Entering June, the scrapping volume of batteries has not significantly increased, while many enterprises that had previously halted production due to maintenance, certification, or equipment failures are resuming or preparing to resume production, increasing the demand for battery scrap and other lead-containing scrap. The supply of battery scrap will remain tight in the short term. Therefore, for the national refined lead output in June, SMM conservatively estimates an increase of 23,500 mt to 291,400 mt.

Refined Zinc
SMM data showed that China's refined zinc output in May 2024 was 536,200 mt, up 31,600 mt or 6.26% MoM, and down 5.02% YoY. The cumulative output from January to May was 2.636 million mt, down 1.43% YoY, slightly higher than expected. The domestic zinc alloy output in May was 95,000 mt, down 500 mt MoM.
Entering May, the output of domestic smelters increased, mainly due to the recovery of smelters in Henan, Gansu, Xinjiang, and Hunan after maintenance, and the increase in output from smelters in Yunnan, Sichuan, and Guizhou also contributed to a certain output increment. However, the maintenance, production reduction, and shutdown of smelters in Gansu, Shaanxi, Hunan, Guangxi, and Inner Mongolia brought a certain reduction in output. Overall, the output increased significantly.
SMM expects domestic refined zinc output in June 2024 to decrease by 9,300 mt MoM to 526,900 mt, down 4.63% YoY. The cumulative output from January to June is expected to be 3.163 million mt, down 1.98% YoY. The main reason for the decline in output in June is the maintenance and production reduction of some smelters in Hunan due to environmental protection issues, and the reduction in output in Inner Mongolia due to raw material issues. The output increase mainly comes from the recovery of some smelters in Shaanxi, Gansu, Yunnan, and Guizhou after maintenance. Overall, the decline in output is not significant.

Refined Tin
According to the SMM survey, domestic refined tin production reached 16,720 mt in May, up 1.06% MoM and 6.77% YoY. In Yunnan, a refined tin smelter continued to halt production due to handover issues, and some producers underwent maintenance for 1-2 weeks due to environmental inspections. Therefore, tin ingot production slightly decreased MoM in May. In Jiangxi, thanks to ample scrap supply, some smelters significantly ramped up their output. A refined tin smelter in Inner Mongolia maintained normal production, while a producer in Guangxi saw a rebound in tin ingot production after equipment maintenance. Producers in Anhui and other regions generally kept normal production in May. Looking ahead to June, most smelters in Yunnan are expected to produce normally, with some temporarily idled producers expected to restart. However, the resumption time for producers that halted production due to handover issues remains unclear. Most producers in Jiangxi plan to continue normal production, with some expected to see a slight increase in production. A smelter in Hubei is planning to purchase scrap to restart due to ample scrap supply. Most smelters in other regions are also expected to maintain normal production. The tin ingot production in June is estimated to reach 17,280 mt, up 3.35% MoM and 21.49% YoY.

Refined Nickel
In May, the national refined nickel production totalled 25,700 mt, up 4% MoM and 42.87% YoY, basically in line with expectations. In May, some nickel producers completed equipment maintenance and operated at nearly full capacity. In addition, nickel enterprises that had previously reduced or halted production due to a shortage of raw materials began to resume normal production.
It is expected that the national refined nickel production in June will be 26,200 mt, a significant rebound compared to May. According to the SMM survey, entering June, nickel prices began to show a turning point, fluctuating downward. The corresponding raw material prices followed suit and began to decline. The price gap between the domestic and overseas markets still existed, leading to a continuous increase in the production of nickel enterprises qualified for exports. The newly commissioned nickel plate production at the beginning of 2024 is still in the ramp-up stage. In summary, the refined nickel production in June is expected to increase by 1.95% MoM.

China NPI
In May, the national NPI production in China was 27,200 mt in metal content (+1.54% MoM) and 680,000 mt in physical content (+4.99% MoM). Among them, high-grade NPI production was about 204,000 mt in physical content and 20,100 mt in metal content (-100 mt in metal content); low-grade NPI output was about 442,000 mt in physical content and 7,100 mt in metal content (+500 mt in metal content). In May, some NPI smelters resumed production. The increase in the domestic 300-series stainless steel production expanded, leading to a short-term active demand. Additionally, the price of high-grade NPI rebounded in May, alleviating the losses of domestic NPI smelters and enhancing production enthusiasm. From the perspective of integrated steel mills, high-grade nickel ore prices stayed high amid the unclear Indonesian RKAB approval in May, leaving a weakened cost advantage of producing stainless steel from high-grade NPI based on the RKEF process. Therefore, NPI production declined, and some integrated steel mills increased their external procurement of high-grade NPI. Affected by nickel ore prices and the disturbances in Indonesian nickel ore policies, domestic NPI output increased limitedly.
Entering June, the national NPI production is expected to stand at about 27,400 mt in metal content (+0.89% MoM) and 675,000 mt in physical content (-0.77% MoM). According to the SMM survey, some smelters in North China are expected to resume production in June, and those in East and South China are expected to increase production. As the impact of environmental inspections in some regions ended in May, NPI production is expected to return to normal in June. For integrated steel mills, the production of high-grade NPI using the RKEF process is still estimated to decline due to inferior stainless steel cost-effectiveness.

Indonesian NPI
In May, Indonesian NPI production was 112,600 mt in metal content, up 0.63% MoM but down 4.5% YoY. The production in 2024 totalled 578,200 mt in nickel content, up 10.3% YoY. Supply side, although the RKAB approval quotas for Indonesian laterite nickel ore increased to 217 million wmt in May, the growth in the circulating supply remained slow. Therefore, the prices of Indonesian high-grade laterite nickel ore for domestic trade remained high. In May, more laterite nickel ore from the Philippines compensated for the supply gap in the Indonesian market. Demand side, with the recovery of high-grade NPI prices and the output ramp-up from new production lines in Indonesia, Indonesian NPI smelters were more willing to purchase nickel ores. In the short term, the supply tightness of Indonesian laterite nickel ore will not significantly improve. It is expected that in June, with the continuous rise in the prices of Indonesian laterite nickel ore for domestic trade, the raw material costs for Indonesian NPI smelters will further increase, resulting in a limited increase in the expected production.

Nickel Sulphate
In May, the national nickel sulphate production was 32,700 mt in metal content and 162,100 mt in physical content (-5.02% MoM, -0.06% YoY). Due to tight raw material supply, nickel sulphate production in May was lower than expected. In addition, with high nickel prices, nickel sulphate plants suffered losses, leading to a reduction in production.
In June, constrained by the persisting tight raw material supply in Q2 and significantly weakened downstream demand, nickel sulphate plants may see inventory accumulation. The national nickel sulphate production in June is estimated to reach 30,800 mt in metal content and 192,900 mt in physical content (-5.82% MoM, -12.17% YoY).

Battery-grade Manganese Sulphate
In May, China's production of high-purity manganese sulphate was approximately 16,300 mt, down 4.11% MoM, primarily as some producers had plans of production halts for maintenance. In addition, affected by unstable manganese ore prices on the raw material side, enterprises were cautious in shipments, resulting in a decline in overall scheduled production. In May, as issues at the South32 mine had not been resolved, port inventories were continuously consumed. Miners were still reluctant to sell at low prices, causing manganese ore prices to keep rising, pushing up the costs of high-purity manganese sulphate. Manganese salt plants in Guizhou had no plans to resume production, and others experienced short-term production halts for maintenance due to equipment upgrades and other factors. With the limited profits in the high-purity manganese sulphate market, producers mostly maintained production based on sales and were unwilling to build up inventory, leading to a reduction in overall market supply.
Entering June, since the supply gap of manganese ore is difficult to fill in the short term, the price of imported Gabonese manganese ore will continue to rise. As a result, high-purity manganese sulphate producers will offer higher. Some will resume normal production, leading to an increase in overall scheduled production. Demand side, most ternary cathode precursor producers maintained purchases as needed, with stable procurement volumes. Therefore, the production of high-purity manganese sulphate in June is expected to increase, reaching approximately 19,200 mt, up 17.79% MoM.

Electrolytic Manganese Dioxide (EMD)
According to SMM, China's EMD production in May stood at 15,300 mt (including 1,600 mt of LMO type, 9,100 mt of alkaline manganese type, and 4,600 mt of carbon zinc type), down 1.96% MoM and 10.18% YoY. As the downstream demand for LMO weakened, market inquiry frequency slowed down, reducing demand for LMO-type EMD, resulting in fewer new orders. Additionally, affected by the mining end, the raw material prices rose, providing more cost support for EMD prices. However, constrained by demand, EMD prices had limited upward momentum, pulling down scheduled production. In May, high temperatures may cause electrolyte leakage during the production of primary batteries, leading to a decrease in transactions for carbon zinc and alkaline manganese types of EMD.
Entering June, the downstream demand for LMO is expected to further weaken, driving the production of LMO-type EMD to decline. Since primary batteries, as consumer goods, have relatively fixed demand, the production of carbon zinc and alkaline manganese types of EMD will not show an increasing trend. Therefore, the overall scheduled production will slightly decline. The EMD production in June is estimated to be around 15,000 mt.

Trimanganese Tetroxide (Mn3O4)
According to SMM, China's Mn3O4 production was 9,700 mt (including 5,300 mt of electronic grade and 4,400 mt of battery grade) in May, down 2.02% MoM and 8.75% YoY. The reasons are: First, entering the traditional off-season, LMO cathode producers held fewer new orders amid relatively sluggish downstream demand compared to April, leading to a decline in the procurement of battery-grade Mn3O4. Therefore, the scheduled Mn3O4 production slight dropped. Second, in May, Guangxi experienced the strongest rainfall of the year, affecting many cities and limiting the operations of some producers, resulting in insufficient production momentum.
Entering June, downstream battery cell manufacturers are expected to adopt a wait-and-see attitude towards purchases, further reducing demand for LMO. Therefore, the procurement of battery-grade Mn3O4 may decline. For the electronic grade Mn3O4, the overall market is relatively stable, with no significant fluctuations expected. In summary, the overall production of battery-grade Mn3O4 in June is expected to decline to around 9,500 mt.

High-carbon Ferrochrome
According to SMM, the national high-carbon ferrochrome production reached a new high of 792,000 mt in May, up 55,200 mt MoM (+7.49%) and 261,100 mt YoY (+49.18%). Among them, the production in Inner Mongolia was 522,500 mt, up 30,000 mt MoM (+6.09%), and the production in Sichuan was 32,000 mt, up 77.78% MoM. The bidding prices of mainstream stainless steel mills for high-carbon ferrochrome remained high. In addition, with the increase in stainless steel production, the demand for high-carbon ferrochrome remained strong. Therefore, high-carbon ferrochrome producers had rising production enthusiasm. Additionally, as South China entered the rainy season, high-carbon ferrochrome producers in Sichuan significantly increased their production resumption, with decent profits, while those in other regions also took this opportunity to put previously built capacities into production.
It is expected that the high-carbon ferrochrome production in June will slightly increase to 806,100 mt, exceeding 800,000 mt for the first time. High-carbon ferrochrome procurement prices of mainstream stainless steel mills remained high in June. The operating rate of high-carbon ferrochrome producers had reached a high level. High chrome ore prices compressed the profits of producers. Market concerns about high prices gradually emerged, leading to a recent weakening in retail transactions. Currently, high-carbon ferrochrome producers mainly rely on long-term contract orders. Due to the above factors, further expansion in production faces difficulties. Although the overall production may slightly increase, the growth is expected to be limited.

Stainless Steel
According to an SMM survey, the stainless steel production in China in May was approximately 3.2632 million mt, up 2.41% MoM and 4.66% YoY. Specifically, the production of 200-series stainless steel was about 870,700 mt, up 1.8% MoM; the production of 300-series stainless steel was about 1.737 million mt, up 6.01% MoM; and the production of 400-series stainless steel was about 662,100 mt, down 1% MoM.
At the beginning of May, the stainless steel market ran weak. Entering the traditional off-season, downstream consumption declined significantly after the Labour Day holiday. However, nickel ore prices stayed high amid slow Indonesian nickel ore approval, and NPI prices rose due to supply tightness. As a result, the overall cost for domestic stainless steel mills increased. While futures prices were driven up by overseas funds and policy influences, spot prices lacked upward momentum and stabilised amid weak end-user demand, despite cost support. The cost of 300-series stainless steel increased, leading to losses, but in the bearish market, stainless steel mills were reluctant to slash production to maintain market share. Some integrated steel mills in East and South China maintained high operating rates, leading to an increase in 300-series crude stainless steel in May. The prices of low-grade NPI, mainly produced from Philippines nickel ores, held stable. With steady downstream demand and decent profits, 200-series stainless steel saw a slight increase in production. For the 400-series stainless steel, both cost and demand held stable, resulting in flat crude stainless steel production.
Entering June, downstream demand for stainless steel remained weak. Stainless steel mills discarded the strategy of shipment control to support prices, but began to increase supply instead. Therefore, social inventory of stainless steel accumulated. In addition, with the warrant pressure brought by high futures prices and premium, the market sentiment turned bearish again after the strong performance of the non-ferrous metal sector, putting pressure on spot prices. Profits of 300-series stainless steel are expected to remain difficult to improve. On the raw material side, the total approval quotas for Indonesian nickel ore remained low, the prices of NPI and ferronickel stayed high, and the costs of high-carbon ferrochrome, coking coal, and silicomanganese also remained high. With the 200-series stainless steel maintaining profits, the production of 300-series stainless steel is expected to slightly decrease and may convert to 200-series stainless steel in June.

EMM
According to SMM, China's EMM production in May was 100,900 mt, up 3.52% MoM and 33.28% YoY. In January-May, the production totalled approximately 478,500 mt, down 3.20% YoY. Guangxi, Guizhou, and Sichuan saw growing operating rates, contributing to EMM production increase in May. Specifically, EMM plants in these regions resumed production, and large plants had orders scheduled until June, operating at full capacity. However, some large EMM plants in Guizhou experienced production cuts due to production pressure, but the reduction was minimal.
Entering June, idled EMM plants in Guangxi and Hunan may have plans to restart in June, but the resumption time varies among factories, so the estimated increase in production is limited. EMM production for June is estimated to reach about 104,900 mt.

SiMn Alloy
According to SMM, China's SiMn alloy output was 803,700 mt in May, up 3.30% MoM but down 13.96% YoY. In January-May, the production totalled approximately 4.0659 million mt, down 12.47% YoY. High-priced manganese oxide ore provided strong cost support, leading to an upward trend in SiMn spot prices in May. Consequently, SiMn alloy producers with manganese ore inventory were motivated to increase production due to expanding profits. Therefore, the SiMn output nationwide increased in May.
Entering June, SiMn alloy producers in Inner Mongolia and Guangxi, who underwent maintenance in May, prepare to resume production. Demand side, some SiMn alloy producers have orders scheduled until June, and SiMn alloy procurement volume by mainstream steel mills in June is expected to increase MoM. Therefore, the overall SiMn alloy output in June is expected to rise to approximately 810,700 mt.

Silicon metal
According to SMM, China's silicon metal production in May was 408,100 mt, up 13.8% MoM (+49,400 mt) and 50.4% YoY (+136,800 mt). In January-May, the silicon metal production totalled 1.823 million mt, up 27.54% YoY (+393,800 mt).
The nearly 50,000 mt increase in May was due to two main factors. First, leading producers in Xinjiang continuously increased their workload, reaching near full capacity and achieving a record high production. Currently, the operating rate of the three major producers in Xinjiang has increased to extremely high levels. Second, silicon plants in Sichuan resumed production in batches during the transitional period from the dry season to rainy season in May, leading to a rapid increase in supply. By early June, the operating rate in Sichuan has increased to over 60% (based on the number of furnaces). Other regions saw minimal fluctuations in silicon metal supply in May.
In June, the expected increase in silicon metal supply will mainly come from the production areas in Yunnan and Sichuan. With an edge in power costs over Yunan, Sichuan saw faster production resumption. Many silicon producers in Dehong Dai and Jingpo Autonomous Prefecture, Yunnan, plan to restart in late June. There will be marginal supply increases from small capacity expansions in Inner Mongolia, Gansu, and other regions. The slight production reductions in high-cost areas like Fujian have limited impact. Overall, it is expected that silicon metal production in June will increase from May to over 420,000 mt.

Polysilicon
In May, domestic polysilicon production was approximately 177,000 mt, down 2.3% MoM. In the latter half of May, several domestic polysilicon producers experienced partial production line shutdowns for maintenance, including some leading producers.
The production in June is expected to further decrease to around 146,000 mt, with more producers continuing to reduce production. It is estimated that about 15 producers will undergo production cuts for maintenance.

PV Module

According to SMM statistics, China's PV module production in May was approximately 52.8GW, down 2.3GW from the previous month, a decrease of 4.2% MoM; compared to the same period last year, the increase reached 25.6%. From January to May 2024, China's cumulative PV module production was about 231.1GW, up 50.1GW YoY, an increase of 78.3%.
In May, the prices in the PV industry chain dropped significantly, and the profit margins of integrated module producers narrowed considerably, even resulting in losses. Additionally, due to PV module production schedules in March and April being much higher than end-user demand, producers faced a sudden increase in inventory pressure. In May, module producers generally reduced their original production plans. Small module factories, amid price competition pressure and reduced order demand, continued to maintain low operating rates. Meanwhile, the US anti-dumping and countervailing duty investigations on Southeast Asia caused market fluctuations, and the expectation of export restrictions affected the production plans of leading producers in their Southeast Asian bases. Starting in May, module producers gradually lowered their production in Southeast Asia.
In June, the profit margins of module producers have not fully recovered, and the risk of inventory accumulation still exists. Module producers continued to reduce domestic planned production, and production bases in Southeast Asia generally adopted measures to significantly lower operating rates or suspend production. Therefore, the production forecast for PV modules in June is expected to continue to decline, estimated to drop to 46.5GW, down 6.3GW MoM, a decrease of 11.9%.
Photovoltaic Cells
In May, the actual production of photovoltaic cells reached 62.05 GW, up 0.3% MoM and 34.45% YoY. Among them, the production of N-type cells was 46.14 GW, up 4.74% MoM, accounting for approximately 74% of the total output. The production of P-type cells was 15.91 GW, down 10.77% MoM.
In May, the demand for photovoltaic cells weakened, and the inventory of N-type cells increased. Major manufacturers increased production due to the ramp-up of Topcon production, but some small and medium-sized cell makers lowered their operating rates to control inventory.
Looking ahead to June, as photovoltaic cell manufacturers are still in a loss and the orders are poor, it is expected that the reduction in cell production will expand, and small cell makers will gradually shut down. However, the ramp-up of production lines at large cell makers will continue. Overall, the planned production of photovoltaic cells in June is 58.69 GW, down 5.4% MoM, and the actual production may be lower than the planned level.

PV glass
According to SMM data, the monthly production of PV glass in China reached 2.4774 million mt in May, up 4.72% MoM. This increase was due to one more production day in May compared to April, and the kilns ignited earlier also started to increase production. Therefore, market supply increased. It is expected that the domestic production of PV glass in June will reach 2.4849 million mt, mainly because the kilns ignited in April and May gradually reached full production.

DMC
According to SMM statistics, China's DMC production in May reached 207,500 mt, up 11.38% MoM. The industry's operating rate for May was 79.81%. The main reason for the production increase is the recent release of new capacity in China, with no new maintenance and production cuts planned, and the operating rate of monomer enterprises continues to rise. For the production forecast in June, SMM expects a continued slight increase, as new capacity will still be released in June, and the capacity put into operation in Q2 will also reach full production, leading to an increase in supply.

Magnesium Ingot
According to SMM data, China's magnesium ingot production in May 2024 was 73,071 mt, up 13.7% MoM.
In May 2024, magnesium ingot production at magnesium plants saw both increases and decreases. Some magnesium plants, affected by rising costs and squeezed profit margins, chose to reduce daily production or conduct rotational maintenance to reduce magnesium ingot supply. The increase in magnesium ingot supply in May was due to several factors: the oversupply of magnesium ingots at the beginning of March, together with tight funds at magnesium plants, led to a continuous decline in magnesium prices throughout March. To alleviate financial pressure, magnesium plants continuously lowered prices to stimulate downstream purchases. However, this price concession did not effectively reduce inventory but instead caused magnesium prices to plummet further. The growing panic among magnesium plants led some to reduce or halt production from late March to mid-to-late April. As maintenance ended, magnesium ingot production increased in May.
In June, soaring ocean freight costs caused overseas customers with non-rigid demand to delay purchasing magnesium ingots. Domestically, high aluminum prices increased inventory pressure on downstream aluminum billet producers. These producers, inhibited by high prices, might choose to cut production to reduce aluminum billet output, potentially decreasing magnesium ingot demand. With high coal and ferrosilicon price, the continuously rising cost of magnesium ingots, together with soaring ocean freight and the pessimistic outlook of reduced aluminum billet production, has led to sluggish magnesium ingot demand, further squeezing the profit margins of magnesium plants. In June, magnesium ingot smelting enterprises might reduce daily production to alleviate pressure. SMM expects magnesium ingot production to decrease to 70,000 mt in June.

Magnesium Alloy
According to SMM data, China's magnesium alloy production in May 2024 was 32,150 mt, up 15.1% YoY.
In May, downstream processing enterprises for magnesium alloy had positive operating rate, and the sharp rise in aluminum prices significantly highlighted the cost-effectiveness of magnesium alloy. Orders for magnesium alloy slightly improved, with large manufacturers operating at full capacity, leading to a 4% MoM increase in magnesium alloy production. The reasons for May's production growth are: downstream and end-user die-casting plants restocked as needed, and some magnesium alloy producers reached full production capacity. In May, magnesium alloy production rose by 15% MoM. Due to the sluggish domestic economy, overall demand in the magnesium alloy market remained weak. SMM expects that magnesium alloy production in June will decline to 28,000 mt.

Magnesium Powder
According to SMM data, China's magnesium powder production in May 2024 was 5,976 mt, up 22% MoM and 8.7% YoY.
The production of magnesium powder in May slightly decreased due to multiple factors, including the sluggish order of magnesium powder producers together with the fluctuating magnesium ingot prices causing strong wait-and-see sentiment among downstream producers, leading to a reduction in production for some magnesium powder producers. A representative from a large magnesium powder producer said that the weak domestic economy impacted steel mills' profits, with frequent changes in magnesium ingot prices making downstream procurement attitudes cautious. Considering that low-price magnesium ingots may stimulate magnesium powder orders, SMM expects domestic production of magnesium powder to remain at 5,500 mt in June.

Ttitanium dioxide
According to SMM data, China's titanium dioxide production in May 2024 was 405,000 mt, down 7.3% MoM.
In May, titanium dioxide production saw both increases and decreases. As the industry entered its traditional off-season, the shipment pace of titanium dioxide producers gradually slowed, leading to a significant increase in inventory pressure. Some titanium dioxide producers began maintenance due to inventory and cost pressures. The increase in titanium dioxide production in May was due to two main reasons: first, producers that had previously halted production for environmental reasons resumed production; second, new capacity increased.
As the titanium dioxide market was affected by the sentiment of "buying on the rise and not on the fall," downstream procurement slowed. Major titanium dioxide producers are gradually accumulating inventory, and producers all have a certain level of stock. In the short term, the orders on hand support the current titanium dioxide prices, leading prices to plateau. However, downstream producers are increasingly adopting a wait-and-see attitude, even delaying purchases. Under inventory pressure, titanium dioxide producers may make concessions. Affected by the high costs of titanium raw materials, they may consider maintenance to alleviate inventory pressure. SMM expects titanium dioxide production in June to remain at 370,000 mt.

Light Rare Earths
In May 2024, domestic Pr-Nd oxide production was 6,625 mt, down 1.3% MoM. The decline was mainly reflected in the Jiangxi.
According to the SMM survey, some separation producers in Jiangxi halted production in May due to environmental protection issues. Some industry insiders said that production is expected to resume normal in July. Pr-Nd oxide production in Jiangxi decreased by 7% MoM, while production in other regions remained flat compared to April. In May, with downstream demand declining MoM, Pr-Nd prices also saw a significant reduction. It is expected that Pr-Nd oxide production will continue to decrease in June as the off-season for downstream NdFeB approaches.

In May 2024, domestic Pr-Nd alloy production was 5,917 mt, up 0.87% MoM.
The overall Pr-Nd alloy production remained stable in May, with little change in the operating rates compared to the previous month. There are reports that some producers will expand production in the future. From the current market trading situation, the stalemate between upstream and downstream in the market is quite severe. The downstream acceptance of high-priced Pr-Nd alloy is limited, and the operating rates of magnetic material plants dropped significantly in May. The follow-up orders for magnetic materials were lower-than-expected. It is anticipated that Pr-Nd alloy production will undergo downward adjustments in June.

Medium-Heavy Rare Earths

In May 2024, domestic production of dysprosium oxide was 215.5 mt, down 0.8% MoM, with the decline mainly reflected in Jiangxi. Domestic production of terbium oxide was 40.8 mt, remaining flat MoM. Domestic production of gadolinium oxide was 303.8 mt, down 1% MoM, with the main decline also reflected in Jiangxi. Domestic production of holmium oxide was 43 mt, showing no significant change compared to April.

According to SMM, production in Longnan of Jiangxi has been halted since May and is expected to continue until July, resulting in a MoM reduction in local oxide production. Specifically, dysprosium oxide production in Jiangxi decreased by 3.1% MoM, and gadolinium oxide production decreased by 3% MoM. Some separation enterprises reported to SMM that landslides caused by weather conditions in Myanmar might impact imports of ionic minerals. Given the current weak downstream demand, it is expected that the production of medium-heavy rare earth oxides will continue to decline.

Molybdenum Concentrate
According to SMM statistics, China's molybdenum concentrate output in May was about 17,500 mt, up 1.75% MoM.
The stable output of molybdenum concentrate in May was mainly due to the following two factors: 1. The downstream demand in the domestic molybdenum market was strong, with increasing demand for molybdenum concentrate. The firm and rising molybdenum prices led to high production rates at molybdenum concentrate mining enterprises; 2. The implementation of expansion projects at molybdenum beneficiation plants also boosted molybdenum concentrate output. The monthly output of molybdenum concentrate in China, except for maintenance, has maintained a stable and increasing trend so far this year.
Entering June, there are few maintenance and production reduction plans at domestic molybdenum mines, and the output of molybdenum concentrate is expected to remain stable.

Ferromolybdenum
According to SMM statistics, China's ferromolybdenum output in May was about 15,600 mt, down 3.6% MoM.
In May, with the rise in domestic molybdenum prices and the increase in other raw material prices, the profit margin of the downstream stainless steel market was greatly compressed, leading to lower procurement prices of ferromolybdenum. Some ferromolybdenum plants even experiencing losses. As a result, some ferromolybdenum plants, with insufficient raw material restocking and lower prices, chose to reduce spot orders to ease losses, leading to a slight decrease in ferromolybdenum output.
In June, the downstream molybdenum-containing steel market plans to cut output further as spot prices lacked upward momentum. Meanwhile, ferromolybdenum producers are likely to return to losses. Therefore, the ferromolybdenum output is expected to continue to decrease slightly this month.

Silver
According to SMM survey statistics, the output of 1# silver in May 2024 was 1,559.333 mt (the output of silver made using ores was 1,017.333 mt), up 27.569 mt or 1.8% MoM, and up 11.4% YoY.
The average price of SMM 1# silver in April was 7,107.3 yuan/kg, and the average price of SMM 1# silver in May was 7,728.65 yuan/kg. Meanwhile, the price fluctuation range in May was larger than in April. In mid-May, LME copper price surged, driving a general rise in non-ferrous metals prices. Silver price deviated from fundamentals, with prices significantly influenced by funds and market sentiment. Silver prices saw sharp rise and fall, continuously hitting new highs. That stimulated the procurement of ore and related products by smelting enterprises. The changes in the silver content of raw materials and the rising prices boosted raw material procurement in March and April. However, enterprises mainly using silver-containing recycled materials faced financial pressure due to high silver prices in May, and there was difficulty in selling and p withdrawal of fund. They had to procure raw materials based on cash flow, with procurement sentiment inhibited. That led to a decline in output.

Silver Nitrate
The output of silver nitrate in May decreased compared to April. The high prices in May inhibited demand, and the restocking in April was strong, leading to a decline in silver nitrate output in May. The output of silver nitrate from domestic enterprises with production and sales qualifications was 880 mt, down 11.6% MoM, and up 51.2% YoY. The reasons for the MoM decline in output in May are: 1. The high silver prices in May inhibited downstream restocking demand. 2. The market conducted stockpiling in April, and some enterprises stopped production due to the Labour Day holiday in May, reducing production days.
In June, due to a slight decline in downstream demand, the output is expected to continue to decrease.

Antimony Ingot
According to SMM survey statistics, China's antimony ingot output (including antimony ingot, crude antimony equivalent, antimony cathode, etc.) in May 2024 was 6,497.93 mt, up 6.77% MoM from 6,086.115 mt in April. After a significant rebound in antimony ingot output in April, the output in May increased slightly again, in line with market expectations. However, the output still did not recover to above the 7,000 mt mark. Due to raw material shortages and the arrival of environmental protection inspection teams in Hunan, some manufacturers stopped production. A few manufacturers increased or decreased output, but no manufacturers resumed production. Currently, raw material resources are still relatively concentrated in the hands of a few manufacturers, and many manufacturers still find it difficult to resume production or continue to increase production.
Among the 33 surveyed enterprises by SMM, 18 manufacturers stopped production, an increase of 5 compared to the previous month; 11 manufacturers reduced output, a decrease of 8 compared to the previous month; 4 manufacturers maintained normal output, an increase of 3 compared to the previous month. SMM expects that the domestic output of antimony ingot in June 2024 will likely increase slightly compared to May, but the extent of the increase will depend on changes in the supply of imported and domestic antimony raw materials.
Note: Since May 2022, SMM has published the domestic output of antimony ingot (including antimony ingot, crude antimony equivalent, antimony cathode, etc.). Thanks to SMM's high coverage rate of the antimony industry, SMM's survey includes 33 antimony ingot production enterprises, distributed in 8 provinces nationwide, with a total sample capacity of over 20,000 mt, and a total capacity coverage rate of over 99%.

Sodium Antimonate
According to SMM's survey of major sodium antimonate manufacturers nationwide, China's sodium antimonate output in May 2024 was 3,140 mt, down 16.93% MoM from 3,780 mt in April. After falling below the 4,000 mt mark in April, the output continued to decline, approaching the 3,000 mt mark. Market participants had generally expected the significant decline in the output in May. The demand from PV glass industry showed a short-term decline, and the rapid rise in antimony prices in May caught many sodium antimonate manufacturers off guard in procuring raw materials. The significant increase in costs also affected order volumes. These factors impacted output.
Among the 11 surveyed enterprises by SMM, 2 manufacturers were in a state of shutdown or commissioning in May, and the production of other sodium antimonate manufacturers was mainly stable or declining, leading to a decrease in overall output. SMM expects that the domestic output of sodium antimonate in June 2024 will likely continue to decline, possibly falling below the 3,000 mt mark.
Note: Since July 2023, SMM has published the domestic output of sodium antimonate. Thanks to SMM's high coverage rate of the antimony industry, SMM's survey includes 11 sodium antimonate production enterprises, distributed in 5 provinces nationwide, with a total sample capacity of over 75,000 mt, and a total capacity coverage rate of over 99%.

Refined Bismuth
According to an SMM survey, China's refined bismuth production in May 2024 was 1,198.869 mt, down 34.89% MoM. After a rebound in March, production has sharply declined for two consecutive months. Compared to the same period in 2023, production also saw a significant drop. However, market participants had generally expected the sharp decline in production in May, which is driven by the current tight supply of bismuth raw materials. Additionally, the central environmental inspection team stationed in Hunan in May, which inevitably affected bismuth production in the region. Among the 24 surveyed producers by SMM, 8 saw a significant decline in production in May; only 2 saw a significant output increase, and 2 producers halted production for maintenance. This led to a sharp drop in overall bismuth ingot production in May compared to the previous month. The bismuth raw material supply remains tight, making raw material shortages a potential reason for further production declines in the future. However, with the central environmental inspection team completing their work in June, Hunan's bismuth production is expected to recover to some extent. Therefore, SMM predicts that China's refined bismuth production in June 2024 is likely to remain stable, with a potential slight rebound. However, it is unlikely to exceed the 2,000 mt mark in the short term.

Note: Since October 2022, SMM has published national refined bismuth production data. Thanks to SMM's high coverage rate in the bismuth industry, the total number of surveyed refined bismuth producers is 24, distributed across 8 provinces, with a total sample capacity exceeding 50,000 mt, covering more than 99% of the total capacity.

Ammonium Paratungstate (APT)
According to SMM statistics, China's APT production in May was approximately 9,200 mt, down 5.7% MoM.
In May, the new round of environmental inspections in major production areas like Jiangxi and Hunan significantly affected APT smelters' production. Some private smelters produced no output for the entire month, limiting the overall production in the APT market.
The environmental inspection team completed their work in early June, and APT smelters are preparing to resume operations in mid-June. The long-term APT orders from May have not yet been fully delivered, and a new round of orders is expected to be fulfilled in June, leading to a slight increase in APT production this month.

Lithium Carbonate
According to SMM statistics, domestic lithium carbonate production in May was 62,538 mt, up 18% MoM and 87% YoY. From January to May, cumulative production was 232,221 mt, up 48% YoY. Breakdown by raw materials, most lithium salt plants using spodumene maintained stable production. Except for a few producers with lower output due to production line maintenance, the output of leading lithium salt plants increased significantly in May. Together with the continuous increase in outsourcing contracts received by some lithium salt plants, the production of spodumene-based lithium salt plants rose in May. Regarding lepidolite smelters, although some producers were affected by environmental protection inspections in Jiangxi in May, limiting their production, the output of leading producers and those needing to purchase lithium ore externally increased, leading to a rise in the total lithium carbonate production from lepidolite. As for salt lakes, with the completion of maintenance by leading producers at the end of April, most salt lake producers gradually entered peak production periods in May, resulting in increased output.
Entering June, some smelting and recycling producers are expected to reduce their scheduled production due to factors such as high cost and lower profit. However, with some producers maintaining production ramp-up and the completion of maintenance by certain leading producers, the expected production of lithium carbonate in China for June is 648,680 mt, up 4% MoM. Additionally, market news suggests that the current inspection in Jiangxi will conclude in early June, and preliminary results may impact the actual production of some producers in June. Subsequent inspections this year will remain a key focus for production in the Jiangxi region. On the demand side, we need to keep an eye on the scheduled production of cathode material plants and the inventory management pressure brought by the end-of-June quarterly reports.

Lithium Hydroxide
In May 2024, lithium hydroxide production in China reached 36,320 mt, up 2% MoM and 45% YoY. By raw material type, the smelting method produced 32,400 mt, up 3% MoM and 60% YoY, while the causticizing method produced 3,900 mt, down 4% MoM and 20% YoY.
From the supply side, most lithium hydroxide enterprises maintained high scheduled production levels in May, mainly due to low inventory levels at the beginning of the month. Some lithium hydroxide manufacturers faced significant delivery pressure due to insufficient inventory, driving them to raise production. The smelting method saw a slight increase in production, mainly due to an increase in OEM orders from overseas and the continuous ramp-up at some enterprises. In contrast, the causticizing method saw a decline in production, mainly because the current price inversion between lithium hydroxide and lithium carbonate made production unprofitable, forcing some causticizing enterprises to cut their production. Additionally, some OEM orders for the causticizing method shifted to the smelting method.
On the demand side, in May, high-nickel cathode material plants saw a significant increase in customer-supplied lithium hydroxide from downstream battery producers. However, due to weakening market expectation for high-nickel ternary materials, battery cell producers significantly reduced orders for ternary cathode materials. This led some high-nickel ternary material enterprises to prefer executing a raw material destocking strategy, tightening their lithium hydroxide purchases. As the NEV market gradually enters the off-season, lithium hydroxide demand is expected to continue its downward trend. SMM forecasts that lithium hydroxide production in June will reach 35,550 mt, down 2% MoM and up 45% YoY.
Cobalt Sulphate
In May, China's cobalt sulphate production was 6,143 mt in metal content, up 20% MoM, down 2% YoY. The main reasons for the increase in production are: first, the release of new capacity from a certain smelter; second, Co3O4 producers increased in-house production of cobalt sulphate due to difficulties in sourcing externally.
For June, although the demand from the precursor sector is weak, there is still demand in other sectors. Some producers plan to postpone their production cuts to July when the arrival of the peak electricity consumption season could potentially lead to power shortages. The total production in June is expected to at approximately 6,119 mt in metal content, with little MoM fluctuation, down 16% YoY.

Tricobalt Tetraoxide (Co3O4)
In May, China's production of tricobalt tetraoxide was 7,335 mt, down 5% MoM and up 4% YoY. The main reasons for the decrease in production are: the current market concentration is relatively high, and although major producers have moderate orders, smaller producers face obstacles in shipping, leading to a decline in production. Additionally, some tricobalt tetraoxide smelters underwent maintenance during the month, resulting in reduced output.
It is expected that in June, downstream demand will show signs of a slight recovery, with major tricobalt tetraoxide smelters operating at high capacity, and producers resuming operations after maintenance. Therefore, production is expected to increase slightly MoM to approximately 7,435 mt, up 1% MoM and down 6% YoY.
Ternary Cathode Precursor
In May 2024, China's ternary cathode precursor production was approximately 63,923 mt, down 13% MoM and up 4% YoY. From January to May, the cumulative production reached 352,881 mt, with a YoY increase of 20%.
On the supply side, in May, precursor producers, constrained by high metal salt prices, selectively took orders and scheduled production based on sales. As a result, precursor supply was lower-than-expected, with a significant reduction. On the demand side, domestic cathode producers reduced their procurement of ternary cathode precursors due to weaker order volumes. Regarding overseas demand, some precursor producers' overseas orders remained stable but weak.
Looking at June, on the demand side, cathode scheduled production continues to weaken. Pick-up of precursors declined under long-term orders. For spot orders, due to high nickel salt prices, some small factories, constrained by high production costs, still have external procurement needs. However, the overall volume is small, making it difficult to form a significant increase in demand. On the supply side, precursor producers, affected by losses and reduced downstream procurement, have reduced production.
It is expected that in June 2024, China's ternary cathode precursor production will be 59,963 mt, with a MoM decrease of 6% and a YoY decrease of 19%.

Ternary Cathode Material
In May 2024, China's ternary cathode material production was 51,900 mt, down 20% MoM and 5% YoY. The cumulative production from January to May was 282,300 mt, up 22% YoY.
From the supply side, ternary cathode material production saw a significant decline in May, mainly due to a decrease in downstream orders and substantial destocking pressure. Since mid-May, with the weakening of lithium prices, battery cell manufacturers have reduced their orders. The pressure on finished product inventories of cathode material manufacturers also became evident, leading to lower-than-expected production levels in May.
Regarding the proportion of material types, the 5-series accounted for 25%, with a MoM increase of 2%, mainly due to the already low base of 5-series materials; the 6-series accounted for 32%, with a MoM increase of 1%; and the 8/9-series accounted for 35.9%, with a MoM decrease of 3%.
In terms of competitive landscape, the market share of manufacturer focusing on medium-nickel materials rose to the top position, reaching 17%. In terms of market concentration ratio in the ternary cathode materials market, CR3 was 40%, CR5 was 53%, and CR10 was 77%.
From the demand side, in May, the procurement demand for ternary cathode materials by battery cell manufacturers saw a significant decline. According to preliminary statistics from third-party institutions, the wholesale sales of new energy passenger car manufacturers nationwide in May reached 910,000 units, up 35% YoY and 16% MoM. Although the NEV market showed optimistic performance, it was still dominated by LFP models represented by BYD. Since February, the share of ternary lithium batteries installation has been declining month by month, leading to limited demand for ternary materials. From the battery side, the production of ternary lithium batteries in May decreased by 2% MoM. Battery makers were in the stage of depleting raw material inventories. Additionally, the demand in consumer and e-bike markets remained stable. First-tier manufacturers maintained full production of small cylindrical batteries, and second-tier manufacturers also showed some recovery compared to last year.
In June 2024, the production of ternary cathode materials in China is expected to be 49,770 mt, with a MoM decrease of 4% and a YoY decrease of 10%. Output in H1 may drop 16% YoY.

Iron Phosphate
In May, China's iron phosphate production was 163,300 mt, up 19% MoM and up 67% YoY. The production and supply of iron phosphate producers increased significantly in May, and demand was also steadily growing, driven by the increase in downstream LFP orders. On the cost side, after mid-May, the price of industrial ammonium surged due to a shortage of water-soluble fertilizer supply in Xinjiang, while the price of phosphoric acid remained stable. The cost of iron phosphate produced by the ammonium process increased significantly. On the supply side, most iron phosphate producers saw an increase in orders and operating rates, while a few producers experienced a decline in production due to costs, prices, and periodic maintenance. On the demand side, in May, downstream LFP plants saw a significant increase in energy storage orders, while the growth rate of LFP demand in the NEV market slowed. The order volume for iron phosphate producers was relatively saturated, and overall demand for iron phosphate in May was good. The price of iron phosphate also gradually strengthened in May due to rising costs. The market outlook for June will weaken, with downstream focusing on clearing inventory. Iron phosphate production in June is expected to decline, with an estimated output of 144,600 mt, down 12% MoM and up 19% YoY.

LFP
In May, China's LFP production was 197,610 mt, up 18% MoM and 78% YoY. On the supply side, LFP producers reported good operating conditions in May, with leading producers nearing full production. Second and third-tier LFP producers were ramping up some capacities while also exploring new customers to gain additional orders. On the demand side, the energy storage market contributed significantly to the demand increase in May, while the growth rate of the NEV market demand slowed. When placing orders for LFP, some downstream battery cell manufacturers shifted from NEV to energy storage market. The total LFP demand in May maintained an upward trend.
In June, downstream end-users and battery cell manufacturers focused on reducing inventory. As a result, upstream cathode producers are expected to see a MoM decline in orders. Market feedback indicates a decline in demand expectations, and LFP producers will accordingly adjust their production schedules. Orders for LFP in the NEV market are expected to decline significantly in June, while the incremental demand from the energy storage market will have a limited impact on the total LFP demand. China's LFP production in June is estimated to be 181,960 mt, down 8% MoM and up 29% YoY.

LCO
In May, LCO production in China was 7,590 mt, up 7% MoM and 10% YoY. From the supply side, the market diverged, with leading manufacturers serving the digital electronics market benefiting from increased downstream demand and ramping up production. However, in the e-cigarette market, demand remained weak, causing small and medium-sized manufacturers to reduce production. Some manufacturers shifted to other segments such as drones to seek orders, leading to intense price competition.
LCO production in June is expected to be 7,860 mt, up 4% MoM and 10% YoY. Although there is a certain decline in scheduled production among second and third-tier manufacturers, the high operating rate of leading manufacturers in the high-voltage market will drive the overall production upward.

LMO
In May 2024, China's LMO production was 11,186 mt, down 5.65% MoM and down 17.23% YoY. The output reduction can be attributed to two reasons. Firstly, falling lithium carbonate prices and relatively sufficient inventory on hand triggered strong wait and see sentiment among downstream battery cell makers, leaving them restocking only as needed. Secondly, significantly weakening LMO demand and intense market competition kept LMO producers cautious about production.
Entering June, lithium carbonate prices are expected to show a slight downward trend. Additionally, the demand from downstream battery cell manufacturers shows signs of weakening further, with no positive trend in the short term. Most LMO producers schedule production based on sales. LMO production is expected to reach 10,722 mt in June, down 4.14% MoM and 27.01% YoY.