SMM analysis on China June LCO output and July forecast

In June, China’s LCO production was 8,080 mt, up 6% MoM and 6% YoY, with a YoY increase of 22% in H1. Although there was a certain decline in the scheduled production of second and third-tier manufacturers, the high operating rate of leading high-voltage LCO manufacturers drove the overall market volume up. The expected LCO production in July is 7,350 mt, down 9% MoM and 10% YoY. Cost side, cobalt prices continued to decline, leading to a decrease in LCO costs. Regarding market conditions, spot orders were relatively quiet, with some manufacturers offering extremely low prices, small and medium-sized manufacturers engaging in price war. Supply side, leading manufacturers reported stable operating rates due to downstream stocking demand, while some manufacturers saw a significant decline in scheduled production after mid-year boosts. Second and third-tier manufacturers had poor operating rates. Demand side, end-users were stocking up in advance for new models in H2, leading to good procurement demand for high-voltage LCO materials in June and July. However, the low-voltage e-cigarette market remained sluggish due to overseas policy.