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Exclusive: SMM China June Metals Production and July Forecast

iconJul 10, 2024 16:09
Source:SMM
In June, China's copper cathode production was 1.005 million mt, down 3,600 mt MoM, a decrease of 0.36% MoM but up 9.49% YoY, and 20,000 mt higher than the expected 985,000 mt.

Copper cathode

In June, China's copper cathode production was 1.005 million mt, down 3,600 mt MoM, a decrease of 0.36% MoM but up 9.49% YoY, and 20,000 mt higher than the expected 985,000 mt. The production in H1 totalled 5.9183 million mt, up 359,100 mt YoY, an increase of 6.46% YoY. In June, SMM increased the coverage rate of its regular survey samples for copper cathode smelters, with the surveyed capacity rising from 13.465 million mt to 13.765 million mt.

According to SMM statistics, 8 smelters underwent maintenance in June, involving a blister copper capacity of 1.56 million mt. However, the decline was less than expected due to several factors: 1) Smelters that underwent maintenance in May gradually resumed production, increasing output; 2) Although the supply of blister copper and copper anode began to decline from late June, most smelters had already stocked up on copper anode, so the reduced supply had little impact on June production; 3) Though smelters would incur a loss of 2,211 yuan/mt when buying spot orders of copper concentrate for production, the nationwide rise in sulfuric acid prices in June partially offset the smelting losses, reducing the willingness of smelters to cut production. Consequently, the sample operating rate of the copper cathode industry in June was 86.31%, down 2.15 percentage points MoM. Specifically, the operating rate of large smelters was 89.91%, down 2.51 percentage points MoM, 81.96% for medium-sized smelters (-2.24 percentage points MoM), and 75.03% for small smelters (+5.63 percentage points MoM). The operating rate of smelters using copper concentrate was 88.6%, down 2.8 percentage points MoM, and that of those not using copper concentrate (use copper scrap or copper anode instead) was 74.8%, up 2.9 percentage points MoM.

Entering July, although 4 smelters will still undergo maintenance, according to SMM statistics, involving a blister copper capacity of 1 million mt, this is a significant reduction from the 8 smelters in June. Additionally, as idled smelters gradually resume production, total output is expected to increase, which SMM believes will be the main reason for the production increase in July. Furthermore, a smelter in Southwest China will accelerate its production ramp-up, contributing to the increase in output. However, there are also some unfavourable factors limiting the production increase. The supply of copper concentrate remains tight (as of June 28, the SMM copper concentrate index was $0.04/mt, up $1.01/mt from the previous month), and the supply of blister copper and copper anode also starts to decrease, forcing some smelters to slightly reduce production. Additionally, the hot weather in July has led some smelters to lower production efficiency, resulting in a decline in output.

Based on the scheduled production of various smelters, SMM expects domestic copper cathode production in July to be 1.0166 million mt, up 11,600 mt MoM, an increase of 1.15% MoM, and up 114,500 mt YoY, an increase of 9.8% YoY. The production in January-July is expected to total 6.9349 million mt, up 449,800 mt YoY, an increase of 6.94% YoY. The sample operating rate of the copper cathode industry in July is expected to be 87.41%, up 1.1 percentage points MoM. Specifically, the operating rate of large smelters is expected to be 92.61%, up 2.7 percentage points MoM, 80.62% for medium-sized smelters (-1.34 percentage points MoM), and 73.32% for small smelters (-1.71 percentage points MoM). The operating rate of smelters using copper concentrate is expected to be 90.7%, up 2.1 percentage points MoM, while that of those not using copper concentrate (use copper scrap or copper anode instead) is expected to be 71%, down 3.8 percentage points MoM. As the number of smelters with maintenance plans in August will further decrease and three new smelters will start production, the output in August is expected to continue to rise.

Aluminium

According to SMM, China's aluminium output in June (30 days) was 3.553 million mt, up 5.56% YoY. In June, the capacity awaiting resumption in Yunnan was almost fully put into production, and part of the capacity in Huayun Phase Ⅲ in Inner Mongolia also reached full production. The operating capacity of domestic aluminium continued to rise in June. However, as downstream entered the traditional off-season, billet plants and other processing plants reduced production or underwent maintenance, resulting in the proportion of aluminum liquid not rebounding as expected but showing a downward trend instead. The proportion of aluminum liquid was around 71.85%, down 1.4 percentage points MoM and 0.1 percentage points YoY. Based on SMM aluminum liquid proportion data, the domestic aluminium ingot output in June increased by 6.41% YoY to around 1.0002 million mt.

Capacity changes: As of the end of June, SMM statistics showed that the installed capacity of domestic aluminium was about 45.362 million mt, and the operating capacity was about 43.248 million mt, with the industry's operating rate up 4.76 percentage points YoY to 95.34%. The newly installed capacity in June mainly came from the Huayun Phase Ⅲ project (170,000 mt/year) in Inner Mongolia. By the end of June, one-third of this project was put into operation, and the remaining capacity will gradually be commissioned and reach full production in July-August. In addition, the idled capacity in Yunnan was almost fully resumed, with only a few old plants not completing technical renovations, contributing to the domestic aluminium operating capacity in June.

Production forecast: Entering July, the domestic aluminium operating capacity will mainly continue to rise, mainly due to the gradual commissioning and full production of Huayun Phase Ⅲ project in Inner Mongolia and the gradual resumption of previously renovated projects in Sichuan. SMM expects the annualized operating capacity of domestic aluminium to increase by about 150,000 mt MoM to 43.4 million mt by the end of July, with a total production of about 3.68 million mt in July (31 days). Additionally, as the downstream entered the traditional off-season in June, the demand weakened, leading to reduced or halted production for technical renovations in billet plants, bringing increased ingot output in June. According to the SMM survey, the downstream showed no signs of significant demand recovery in July. It is expected that the proportion of aluminum liquid will only slightly rebound to around 72% in July. Future attention should be paid to the resumption of aluminium production in various regions and the operating conditions of downstream aluminum liquid processing plants such as billet plants.

Alumina

According to SMM, China's metallurgical-grade alumina output in June (30 days) was 6.842 million mt, with an average daily output of 228,100 mt/day, a slight increase of 2,600 mt compared to May. Due to fewer production days in June, June output decreased by 2.10% MoM but increased by 5.91% YoY. By the end of June, China's installed capacity for metallurgical-grade alumina was 100.6 million mt, with an operating capacity of 83.24 million mt and an operating rate of 82.7%. H1 output reached 40.293 million mt, up 3.84% YoY.

By region:

Shanxi: The operating rate in June was 76.6%, a slight increase of 0.8% compared to May. In June, alumina producers in Shanxi saw mixed changes in their production. A medium-sized alumina refinery increased production in mid-June, involving an annual capacity of 300,000 mt. Meanwhile, some alumina refineries in Shanxi reduced production due to bauxite supply issues, involving an operating capacity of 200,000 mt.

Henan: The operating rate in June was 68.3%, an increase of 2.2% MoM, primarily as a local alumina refinery increased production in early June as bauxite supply shortage eased, involving an annual capacity of around 300,000 mt.

Guizhou: The operating rate in June increased by 1.0% MoM to 81.8%, mainly as an alumina refinery conducted equipment maintenance in May, impacting an operating capacity of 400,000 mt, and later resumed production to around 900,000 mt in June. Meanwhile, another alumina refinery in Guizhou reduced production due to raw material supply issues, involving an annual capacity of around 150,000 mt.

Hebei: The operating rate in June decreased by 6.1% MoM to 89.6%, mainly because a local alumina refinery conducted roasting furnace maintenance in June, involving an annual capacity of 800,000 mt.

Guangxi: The operating rate in June rose slightly by 0.5% MoM to 88.9%. In June, alumina producers in Guangxi both increased and decreased production. An alumina refinery increased production by supplementing raw materials with imported bauxite, involving an annual capacity of 200,000 mt. Meanwhile, another local alumina refinery reduced production by about a quarter due to roasting furnace maintenance, with initial plans to complete maintenance by mid-to-late July.

Shandong: Alumina producers showed mixed production changes, with the overall operating rate in Shandong remaining at 94.4% in June.

July forecast: The SMM survey indicates that approximately 300,000 mt of resumed capacity in Shanxi will gradually be released in July. An alumina refinery in Guangxi plans to complete maintenance by mid-July, resuming 300,000 mt of capacity. Additionally, new capacity in Inner Mongolia is expected to gradually be released in mid-July. Therefore, it is expected that the average daily output of alumina in China will continue to increase in July. However, due to the limited resumption of bauxite production in Shanxi and Henan, local bauxite supply remains tight, which may limit significant increases in alumina output in these regions. SMM expects that the average daily output of metallurgical-grade alumina in China will reach 230,800 mt in July, with a total operating capacity of around 84.24 million mt, up 3.9% YoY.

Overseas Aluminium

According to SMM, the total overseas aluminium output in June (30 days) was 2.452 million mt, up 1% YoY. H1 output totalled 14.874 million mt, up 1.6% YoY. The average overseas capacity utilization rate was 87.3%, flat MoM, and slightly up 1.1% YoY.

By region:

North America: The total output in June was 323,000 mt. The shutdown of New Madrid at the beginning of this year caused the aluminium output in North America to decrease by 3% YoY. The current average capacity utilization rate in North America is 84.3%.

South America: The total output in June was 134,000 mt, up 6.3% YoY. The increase came from the resumption of two smelters, namely Alumar (60% owned by Alcoa and 40% by South 32) and Aluminio of Brazilian local aluminium producer Companhia Brasileira de Aluminio (CBA). The Alumar smelter's capacity utilization rate recovered to about 70% in June, with the output of about 27,000 mt. CBA stated that the demand in the Brazilian market had improved compared to the same period last year and planned to restart two idled production lines in 2023-2024, with an expected capacity increase of 80,000 mt. In June, CBA's aluminium output was about 30,000 mt, with a capacity utilization rate of about 80%, up 5.4% YoY.

Russia: The total output in June was about 340,000 mt, up 3.1% YoY. The increase came from the Taishet smelter. This smelter announced its resumption at the beginning of 2022, but the progress has been slow. SMM estimates that the total output of this smelter in June was about 18,500 mt, with the capacity utilization rate recovering to about 54%.

Europe (excluding Russia): The total output in June was about 277,000 mt, down 0.6% YoY, with a capacity utilization rate of 69.4%

Africa: The total output in June was about 135,000 mt, up 2.6% YoY, with a capacity utilization rate of about 84.9%. The power outage impact on the Mozal smelter under South 32 in 2024 Q1 faded, and it has resumed normal production. The increase came from Egyptalum's Nag Hammadi smelter. Egyptalum is the largest aluminium producer in Egypt, and its smelters keep operations stable, with continuous growth in output. The current annual capacity of Nag Hammadi smelter is 320,000 mt, with a capacity utilization rate of about 78%.

Oceania: The total output in June was about 155,000 mt, slightly up 1.4% YoY, with an average capacity utilization rate of about 90%.

Middle East: The market demand performed well. The total output in June was about 580,000 mt, slightly down 0.2% YoY, with an average capacity utilization rate of 102.2%.

India: The total output in June was about 338,000 mt, up 1.6% YoY. The average capacity utilization rate was 100.3%.

Other regions in Asia excluding China, India, and the Middle East: The total output in June was 171,600 mt, up 4.8% YoY. The growth mainly came from Indonesia. The Huaqing Aluminium smelter in Indonesia started operations in 2023, with a capacity of 500,000 mt in 2024. SMM estimates that the output of this smelter in June was about 22,000 mt, with a capacity utilization rate of about 56%.

July forecast: According to SMM, the overseas aluminium output in July (31 days) is expected to be about 2.54 million mt, up about 0.6% YoY. The average capacity utilization rate of overseas aluminium smelters is expected to be about 87.5%, up 0.2% MoM and 0.8% YoY.

Overseas Metallurgical-Grade Alumina

In June (30 days), the production of overseas metallurgical-grade alumina was approximately 4.68 million mt, up 0.7% YoY. The average capacity utilization rate of global alumina refineries was 80.1%, down 0.3% MoM and 1.1% YoY. H1 production totalled about 28.7 million mt, up 1.8% YoY.

By region:

Australia: The production in June was 1.43 million mt, down 8.3% 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 be completely shut down by the end of Q2. SMM estimates that the production of this refinery in June decreased by about 85% YoY, with an average capacity utilization rate of about 8%. Additionally, the explosion of the Queensland natural gas pipeline in March 2024 affected the operations of Rio Tinto's Gladstone business, with the capacity utilization rate of the Yarwun alumina refinery dropping to about 73%.

North America: The production in June was 157,000 mt, down 1.6% YoY, with the average capacity utilization rate at 70.4%.

South America: The production increased by 9.6% YoY to 925,000 mt, with the growth from the Alumar alumina refinery in Brazil. The refinery was shut down for maintenance in 2023 Q2 and resumed normal production in Q3. Its production in June was about 286,000 mt, with a capacity utilization rate of about 90%.

Africa: The production in June was 33,000 mt, down 0.3% YoY, with an average capacity utilization rate at 61.5%.

India: The production in June was 655,000 mt, up 6.9% YoY. The increase mainly came from Vedanta's alumina refinery in Lanjigarh. Vedanta announced at the beginning of April 2024 that the refinery's capacity would increase from 2 million mt to 3.5 million mt, with plans to expand to 5 million mt in the future. SMM estimates that the production of this refinery in June increased by 56,500 mt YoY, and it is expected to grow further in the future.

Indonesia: Since the ban on bauxite exports in June 2023, Indonesian alumina capacity has grown rapidly. The production in June was about 312,000 mt, up 18.4% YoY, mainly due to the capacity expansion of Nanshan Aluminum's alumina refinery on Bintan Island. The SMM survey showed that the refinery was put into operation with a capacity of 1 million mt in 2022 and added a capacity of another 1 million mt in 2023, with a current total operational capacity of 2 million mt. The current production is close to the nameplate capacity, with June production up 30% YoY.

Russia: The production in June was 248,000 mt, down 0.3% YoY, with the average capacity utilization rate at about 88.7%.

Europe (excluding Russia): The production in June was 286,000 mt, up 0.5% YoY, with the average capacity utilization rate at about 53.7%.

Other Asian regions (excluding India, Indonesia, and China): The production in June was 635,000 mt, down 1.7% YoY, with an average capacity utilization rate of 87.4%.

July forecast: According to SMM, the total production of overseas metallurgical-grade alumina in July is expected to be 4.88 million mt, down 0.6% YoY. The average capacity utilization rate is expected to be about 80.1%, flat MoM but down 2.9% YoY.

Primary Lead

In June 2024, the national primary lead production was 282,700 mt, down 2.12% MoM and 3.54% YoY. In H1 2024, the cumulative primary lead production was down 4.65% YoY. The total production capacity of the surveyed enterprises in 2024 was 6.0063 million mt.

According to the survey, the maintenance of primary lead smelters increased in June, and the production continued to decline. In June, several primary lead delivery brand enterprises started maintenance from early June to the end of the month, especially in mid-to-late June, with concentrated maintenance in smelters in Henan, Anhui, and Inner Mongolia, mostly large enterprises with significant reductions. Therefore, even after the resumption of production in smelters in Yunnan, Hunan, and other regions, the primary lead production in June still recorded a slight decrease.

Entering July, the SHFE/LME price ratio expanded as the former outperformed the latter, so lead concentrate imports increased, and imported crude lead also flowed into the domestic market, easing the tight domestic raw material supply to some extent. According to the SMM survey, as of July 5, the total lead concentrate inventory at Lianyungang and Fangchenggang ports was 32,000 mt, an increase of 13,000 mt compared to the end of June. Meanwhile, the maintenance of primary lead smelters gradually ended, with smelters in Henan, Anhui, Hunan, Liaoning, and other regions resuming production, contributing significantly to the production increase in July. SMM expects primary lead production in July to increase by nearly 20,000 mt compared to June, reaching 300,000 mt.

Secondary Lead

In June 2024, China's secondary lead production was 331,600 mt, up 3.43% MoM but down 8.95% YoY. From January to June 2024, the cumulative secondary lead production was 1.9351 million mt, down 8.45% YoY. In June 2024, secondary refined lead production was 275,900 mt, up 3.04% MoM but down 13.66% YoY, and was 1.645 million mt in H1, down 10.26% YoY.

The tight domestic raw material supply situation remained unchanged, especially with battery scrap being a common raw material for both secondary lead and some primary lead smelters. With the tight supply of lead concentrate, primary lead smelters dismantled battery scrap to obtain lead paste as a major raw material supplement. This also increased the pressure on secondary lead smelters to procure raw materials, leading to production reductions or suspensions in several secondary lead smelters in June due to insufficient raw materials. The enterprises contributing to the production increase in June were mainly located in Anhui, Jiangxi, Guangxi, and other regions, mainly due to the end of maintenance and resumption of production.

Entering July, the supply of battery scrap did not show significant improvement, and most secondary lead enterprises still expected a decline in July production. Additionally, the policy of canceling tax incentives, effective from August 1, might discourage some secondary lead smelters from resuming production. Overall, SMM expects secondary refined lead production in July to decrease by 33,800 mt MoM to 242,100 mt.

Refined Zinc

According to SMM, in June, China's refined zinc production was 545,800 mt, up 9,700 mt or 1.81% MoM but down 1.2% YoY. H1 output totalled 3.182 million mt, down 1.39% YoY, higher than expected. In June, domestic zinc alloy production was 93,000 mt, down 1,800 mt MoM.

In June, the production of domestic smelters exceeded expectations, mainly due to higher-than-expected production in Guangxi, Gansu, and Guizhou. Additionally, some smelters in Shaanxi, Gansu, Yunnan, and Guizhou resumed production after maintenance, while some smelters in Hunan and other regions experienced production reductions due to shutdowns for maintenance. Overall, the production increased.

SMM expects that in July, domestic refined zinc production will decrease by 38,900 mt MoM to 507,000 mt, down 8% YoY. The production in January-July is expected to be 3.689 million mt, down 2.35% YoY. The main reason for the production decline in July is the reduction in output from smelters in Henan, Inner Mongolia, Shaanxi, Gansu, Qinghai, and Yunnan due to raw material shortages and routine maintenance, although some smelters in Hunan and Yunnan resumed operations after previous maintenance. Overall, the production decline will be significant.

Refined tin

According to the SMM survey, China's refined tin production in June reached 16,285 mt, down 2.6% MoM but up 14.5% YoY. In Yunnan, a refined tin smelter continued to halt production due to handover issues, and some suspended operations for about a week due to environmental protection inspections. Therefore, June tin production slightly decreased MoM. In Jiangxi, thanks to ample scrap supply in the market, some smelters significantly increased production. A refined tin smelter in Inner Mongolia maintained normal production, while a producer in Guangxi began shutdowns for maintenance, resulting in a sharp drop in tin production, with the impact expected to last until August. Smelters in Anhui and other regions generally maintained normal production in June.

Looking ahead to July, most smelters in Yunnan are expected to maintain normal production, but the resumption time for the producer halted due to handover issues remains unclear. Most smelters in Jiangxi plan to continue normal production, with a few expected to slightly increase output. China's tin production in July is expected to reach 16,525 mt, up 1.47% MoM and 21.49% YoY.

Refined nickel

In June, China's refined nickel production totalled 26,600 mt, up 3.7% MoM and 40.54% YoY, in line with expectations. Some nickel producers completed equipment maintenance in June, allowing them to operate at nearly full capacity. On the other hand, nickel producers that had previously reduced or halted production due to raw material shortages resumed normal production, releasing capacity smoothly. Additionally, with the persisting price inversion between domestic and overseas markets, the export profit for domestic nickel plates was still substantial. As a result, some refined nickel producers in East China increased their production in June.

It is expected that China's refined nickel production will increase to 30,300 mt in July. According to an SMM survey, nickel prices showed some resilience entering July, with both domestic and overseas markets performing strongly, leading to a continuous increase in the production of nickel producers qualified for exports. On the other hand, the newly commissioned nickel plate capacity at the beginning of this year is still in the ramp-up stage.

NPI

In June, China's NPI production was 28,100 mt in metal content (+3.51% MoM) and 666,000 mt in physical content (-2% MoM). Among these, the production of high-grade NPI was approximately 213,000 mt in physical content and 21,400 mt in metal content (+1,300 mt MoM); the production of low-grade NPI was approximately 453,000 mt in physical content and 6,700 mt in metal content (-300 mt MoM). Some smelters resumed production, while integrated steel mills, affected by the decline in stainless steel prices, preferred external procurement, leading to a decrease in production. Additionally, the use of high-grade nickel ore by domestic smelters increased, driving up the NPI grade, resulting in a structural change where physical content decreased but metal content increased.

It is expected that in July, China's NPI production will be approximately 28,500 mt in metal content (+1.54% MoM) and 693,000 mt in physical content (+4.08% MoM). According to the SMM survey, in July, NPI smelters will show stronger production enthusiasm, driven by high stainless steel production and the lack of significant increase in Indonesian NPI. Integrated stainless steel mills are expected to reduce high-grade NPI production due to high costs. Overall, it is expected that domestic NPI will continue to increase in July.

Indonesian NPI

In June, Indonesian NPI production was 112,200 mt in metal content, down 0.36% MoM and 8.5% YoY. The production in H1 totalled 690,400 mt in metal content, up 6.8% YoY. Supply side, there was new progress in the RKAB approval for Indonesian laterite nickel ore in June, with cumulative approval quotas of 220 million wmt this year. The approval quotas for 2025-2026 are around 200 million wmt each year. However, the circulating supply of laterite nickel ore in the Indonesian market remained limited, impacted by weather factors. NPI smelters rushed to purchase nickel ore, leading to a strong premium, significantly raising the production costs of Indonesian NPI in June. In addition, with the accelerated progress of some NPI production lines switching to high-grade nickel matte ones, Indonesian NPI production experienced slight fluctuations in June. It is expected that with the successive commissioning of new NPI production lines in Indonesia and the continued conversion of some projects to nickel matte, Indonesian NPI production in July will hold largely stable, with limited room for a significant increase.

Nickel sulphate

In June, China's nickel sulphate production was 30,500 mt in metal content, or 139,100 mt in physical content (-6.52% MoM, -12.82% YoY). In June, active destocking and inventory adjustments by downstream cathode producers negatively affected precursor production. Precursor producers slowed down their nickel sulphate procurement, leading to reduced production at nickel sulphate plants.

Heading into July, due to excessive discounts offered by nickel sulphate plants to promote sales, they suffered losses, resulting in lower operating rates and scheduled production. China's nickel sulphate production in July is expected to be 30,100 mt in metal content, or 137,000 mt in physical content (-1.5% MoM, -25.35% YoY).

Battery-grade Manganese Sulphate

According to SMM, in June, China's battery-grade manganese sulphate production was approximately 16,000 mt, down 1.84% MoM. Overseas manganese ore offers increased by $0.7/mtu MoM, which provided strong cost support, leading battery-grade manganese sulphate producers to hold prices firm. However, the scheduled production of ternary cathode precursors decreased, resulting in slightly weak demand, fewer market inquiries, and quiet spot trade atmosphere. As the profit margins of battery-grade manganese sulphate producers were not fully restored, they mostly produced based on sales, leading to an overall decline in production.

It is expected that in July, the inventory of high-grade manganese oxide ore will be further consumed while end-user steel demand will enter the off-season, causing fluctuations in raw material prices. Manganese sulphate prices may drop slightly. Some manganese sulphate plants that have not yet resumed normal production may return to normal output. Overall, battery-grade manganese sulphate production in July is expected to increase to approximately 17,000 mt, up 6.25% MoM.

Electrolytic Manganese Dioxide (EMD)

According to SMM, China's electrolytic manganese dioxide production in June was 14,700 mt (including 1,100 mt of LMO type, 8,900 mt of alkaline type, and 4,700 mt of carbon-zinc type), down 3.92% MoM and 16.84% YoY. The production of carbon-zinc and alkaline types showed no notable changes, while that of LMO type declined significantly. Entering the off-season, the LMO industry mainly consumed inventory of LMO-type EMD. The overall market adopted a wait-and-see stance, leading to a decline in scheduled production at producers. Additionally, as the demand from the primary battery market held stable, the EMD market held prices firm. Therefore, when downstream LMO producers used EMD for production, the profit was more limited, and new orders also decreased.

It is expected that the production of LMO-type EMD will barely increase in July amid the off-season for LMO industry, the substitutability of Mn3O4 and the loose supply. However, as primary batteries are consumer goods with relatively fixed procurement volumes, the production of carbon-zinc and alkaline type EMD may slightly increase. Therefore, the EMD production in July is estimated to be around 15,200 mt.

Mn3O4

According to SMM, China's Mn3O4 production in June was 9,400 mt (including 5,200 mt of electronic-grade Mn3O4 and 4,200 mt of battery-grade Mn3O4), down 3.09% MoM and 16.59% YoY. The production of battery-grade Mn3O4 significantly fell. Entering the off-season, LMO cathode producers showed no significant change in their procurement and restocking of Mn3O4. The downstream battery cell market was sluggish, and the growth rate of the digital market slowed down. Although the new energy and energy storage markets slightly rebounded, the demand remained weak. LMO procurement was maintained through long-term contracts from leading companies, with few spot transactions.

It is expected that the battery demand will remain in a low-growth state in July, with the persisting sluggish market, potentially further reducing the procurement volume of battery-grade Mn3O4. Therefore, the production of battery-grade Mn3O4 in July is expected to slightly decline. China's July Mn3O4 production is estimated to be to approximately 9,300 mt.

High-carbon ferrochrome

According to SMM, in June, China's high-carbon ferrochrome production further broke historical records, reaching 801,000 mt, up 9,000 mt MoM (+1.14% MoM) and 200,700 mt YoY (+33.43% YoY). Among them, the production in Inner Mongolia was 537,100 mt, up 14,600 mt MoM (+2.79% MoM), and that in Sichuan was 38,800 mt, up 21.25% MoM. The bidding price for high-carbon ferrochrome from mainstream stainless steel mills remained high. Although the price of chrome ore further strengthened, elevating the cost of high-carbon ferrochrome smelting, the retail price of high-carbon ferrochrome also climbed. Additionally, as high-carbon ferrochrome manufacturers still had profits based on low-price raw material inventories from earlier periods, they kept production enthusiasm high. Furthermore, since some production lines resumed and Sichuan officially entered the rainy season, the overall high-carbon ferrochrome production in June increased.

The production of high-carbon ferrochrome in July is expected to be 785,300 mt, slightly down from June. Stainless steel mills kept July procurement prices of high-carbon ferrochrome flat, which have held stable since April. The continuous high operation rate of high-carbon ferrochrome manufacturers led to a slight shortage in chrome ore supply, elevating chrome ore prices. Consequently, the profits of high-carbon ferrochrome manufacturers were gradually eroded, and some have already suffered losses in July. Moreover, entering the traditional off-season, stainless steel saw sluggish sales. Stainless steel mills are expected to reduce production, leading to a decrease in demand for high-carbon ferrochrome. However, the high scheduled production of high-carbon ferrochrome led to a significant surplus within the year. Since June, retail sales have shown weakness, and high-carbon ferrochrome manufacturers have a pessimistic outlook for the future, with declining production enthusiasm.

Stainless steel

According to the SMM survey, China's stainless steel production in June was approximately 3.2302 million mt, down 1.17% MoM but up 5.17% YoY. Among this, 200-series stainless steel production was 916,200 mt, up 4.59% MoM; 300-series stainless steel production was 1.6449 million mt, down 5.30% MoM; and 400-series stainless steel production was 669,100 mt, down 2.08% MoM.

In early June, the stainless steel market performed poorly. The spot prices held stable in the first ten days but started to decline continuously in late June. Entering the traditional off-season, end-user consumption weakened significantly, leading to an overall decline in NPI prices in June. Therefore, the cost support for domestic stainless steel prices weakened. Although the decline in June was not significant, the losses of domestic stainless steel mills, which had operated around the cost line, further worsened. To reduce losses, some 300-series stainless steel mills cut production. The operating rates of stainless steel mills in East and South China decreased, with production lower than expected. In contrast, the production of state-owned steel mills stayed stable. The price of 200-series stainless steel declined, but its profitability was better than that of the 300-series stainless steel. Some electric furnace-based steel mills in South China maintained high profitability and end-user demand held stable, leading to a significant increase in 200-series crude stainless steel production in June. For 400-series stainless steel, despite entering the off-season, rigid demand persisted. After the prices of high-carbon ferrochrome and plain carbon steel fell, the cost of 400-series stainless steel decreased, resulting in a slight increase in crude steel production.

Looking ahead to July, stainless steel demand will remain weak, and the oversupply is unlikely to improve. The pressure on social and in-factory inventories of stainless steel will increase, hindering spot price rises. As nickel ore premiums have started to rise and NPI prices have stopped falling, the cost of stainless steel is unlikely to continue to fall. At the beginning of July, there was a strong wait-and-see sentiment among downstream buyers, and the strong performance of non-ferrous metal futures did not drive up spot prices. To reduce losses, stainless steel mills lowered the scheduled production of 300-series stainless steel in July. Additionally, entering the summer, high temperatures reduced the operating rates of downstream producers, and some stainless steel mills in South China are expected to start annual maintenance. In summary, it is expected that 300-series stainless steel production will significantly decrease in July, while the production of 200-series and 400-series stainless steel may see a slight increase.

EMM

According to SMM, China's electrolytic manganese metal (EMM) output in June was 99,300 mt, down 1.54% MoM but up 66.58% YoY. The output in H1 was approximately 577,800 mt, up 4.31% YoY. The production costs for EMM climbed due to increased prices of manganese carbonate ore procurement and the rising prices of auxiliary materials like sulfuric acid. Additionally, the industry alliance meeting called for the EMM market to hold their offers firm. Therefore, the EMM producers showed a strong willingness to hold prices firm. However, the downstream steel mills' output decreased in June, leading to a lower acceptance of high-priced EMM. Some steel mills also held inventories, making them cautious in purchasing EMM. Due to losses and weak demand from downstream steel mills, some EMM plants slightly reduced production, causing a slight decrease in overall EMM output.

Entering July, the meeting decided that EMM plants would maintain 70% of their capacity, and some EMM plants in Yunnan that had previously halted production might resume operations in July. Therefore, the overall EMM supply will increase. Based on the survey of scheduled production, EMM output in July is expected to reach approximately 105,100 mt.

SiMn Alloy

According to SMM, in June, China's SiMn alloy output was 879,700 mt, up 9.46% MoM but down 9.94% YoY. The output in H1 totalled approximately 4.9455 million mt, down 11.56% YoY. The operating rates in Inner Mongolia, Ningxia, Guangxi, Guizhou, Shanxi, and Yunnan rose. SiMn alloy producers in Inner Mongolia and Ningxia still held low-price, high-grade manganese oxide ore inventories, which resulted in lower production costs compared to those who purchased high-price manganese oxide ore externally. In addition, driven by previous profits, they maintained high operating rates. South China like Yunnan, entering the rainy season, saw lower electricity prices that further reduced SiMn production costs and expanded profits, significantly boosting the enthusiasm of producers. Therefore, the overall SiMn alloy output in China increased in June.

Entering July, most SiMn alloy producers have exhausted their low-price manganese oxide ore inventories and need to purchase high-price manganese ore externally, leading to increased production costs and narrowed profits, even resulting in losses. Additionally, July marks the off-season for downstream steel mills' demand for SiMn, with current procurement volumes lower than in June. Therefore, some SiMn alloy producers in both North and Southern China plan to reduce or halt production. As a result, the overall SiMn output in July is expected to decrease to approximately 854,700 mt.

Silicon metal

As silicon enterprises in Sichuan and Yunnan steadily resumed production during rainy season, June silicon metal output maintained a significant increase

According to SMM, China's silicon metal output in June was 453,100 mt, up 11% MoM (+45,100 mt) and 70.9% YoY (+188,000 mt). The output in H1 totalled 2.2771 million mt, up 34.32% YoY (+581,900 mt).

Silicon enterprises in Sichuan and Yunnan gradually entered or were about to enter the rainy season. In May-June, they gradually resumed production. By June, the operating rate in Sichuan had basically returned to the level of previous rainy seasons, while the resumption pace in Yunnan was slightly slower, with some enterprises choosing to restart in late June or early July. It is expected that the operating rate of silicon enterprises in Yunnan will reach its annual peak in July-August, and the total silicon metal output in Sichuan and Yunnan will increase by nearly 60,000 mt MoM. While silicon plants in Sichuan and Yunnan resumed production, those in Xinjiang saw a MoM decrease of nearly 15,000 mt due to capacity maintenance or production cuts. The operating rate in Inner Mongolia fluctuated little in June.

Entering July, some of the maintenance capacities in Xinjiang will be resumed, and with the release of capacity, the supply of silicon metal in Yunnan still has room to rise, though the contribution from new capacity is limited amid the slow commissioning progress. In contrast, a few silicon enterprises in Inner Mongolia and Gansu are expected to reduce production due to maintenance or market conditions, but the impact on the national total output is temporarily small. Overall, it is expected that China's silicon metal output in July may increase to around 480,000 mt.

Polysilicon

In June, China's polysilicon production was 151,000 mt, showing a significant decrease of 14.7% MoM. Several leading producers, including East Hope, Jingnuo, and Daqo, experienced maintenance and production cuts to some extent, mainly due to previous price drops below the cost line and high inventory levels. However, Tongwei maintained high growth due to the ramp-up of the new production line in Baoshan and the impact of high-level strategy, leading to some production increases.

Entering July, with the easing of inventory pressure, some producers saw an increase in production. The scheduled production is expected to increase by 3,000-4,000 mt to around 154,000 mt.

PV module

According to SMM, China's PV module production in June was approximately 47.7GW, down 5.1GW MoM (-9.6% MoM) but up 25.6% YoY. In H1, the production totalled approximately 278.8GW, up 59.8GW YoY (+27.3% YoY).

In June, the PV module market was highly competitive. The domestic market was mainly supported by centralised procurement demand, while the overseas market saw a slowdown in shipments. With overall weak demand, inventory pressure continued to rise.

Entering July, domestic centralised procurement orders are concentrated for delivery. Some module producers have raised their scheduled production, especially HJT module producers, while other producers mostly maintained stable operating rate. Small plants, with fewer orders, mostly took on outsourcing orders to maintain a low operating rate. However, the risk of inventory accumulation still exists, limiting the increase in scheduled production. Therefore, the scheduled production of PV modules in July is expected to reach 48.3GW, up 0.6GW MoM (+1.2% MoM).

Solar Cells

In June, China's solar cell production reached 54.79 GW, including 11.89 GW of PERC solar cells, 40.15 GW of N-type Topcon cells, 1.14 GW of HJT cells, and 1.6 GW of BC cells. The supply and demand for PERC cells were relatively balanced, with scheduled production declining in line with demand. Topcon cells experienced inventory accumulation for two consecutive months, and companies were forced to significantly reduce production in June amid losses. The production of HJT cells slightly increased, while that of BC cells stabilised.

Looking ahead to July, the scheduled production of PERC cells is expected to continue declining, while that of N-type Topcon and HJT cells is projected to increase. The total scheduled production for July is estimated to be around 58.41 GW, with the increase mainly coming from major integrated manufacturers for low-price stockpiling. Currently, the transaction prices in the PV wafer market have risen due to market sentiment, prompting module manufacturers to ramp up cell production and accelerate stocking. As the self-sufficiency rate of cells among integrated manufacturers increases, the demand for external procurement weakens, putting pressure on non-integrated solar cell producers, who generally lowered their operating rates in July. However, the overall market still sees an oversupply of N-type cells, leading to continued inventory accumulation.

PV glass

According to SMM, China's PV glass production reached 2.4864 million mt in June, up 0.36% MoM. Despite the small increase, it was satisfactory given fewer production days in June compared to May. It is expected that the production of PV glass in China will further increase in July, mainly because the kilns ignited earlier will reach full capacity in July. The production is expected to reach 2.6827 million mt, with a significant increase.

DMC

According to SMM, China's DMC output in June was 206,000 mt, down 0.72% MoM. The total output in H1 was 1.1654 million mt, up 17.72% YoY. The supply slightly slowed down, and some facilities underwent maintenance in June, leading to a slight decrease in operating rates. SMM expects a slight increase in July production due to the production ramp-up of newly commissioned DMC capacity. The domestic DMC output in July is expected to reach 211,500 mt.

Magnesium Ingot

According to SMM, China's magnesium ingot production in June was 71,796 mt, down 1.8% MoM.

In June, magnesium ingot producers generally maintained normal production, but the market focus shifted back to the operating rates of producers in the major production area due to the strong supply and weak demand. The soaring ocean freight caused overseas customers with non-rigid demand to delay their magnesium ingot purchases. In the domestic market, as high aluminum prices increased inventory pressure on downstream aluminum billet plants. Inhibited by high prices, these plants chose to cut production to reduce aluminum billet output, leading to a decrease in magnesium ingot demand. High coal and ferrosilicon prices elevated the cost of magnesium ingots, squeezing the profit margins of magnesium producers and increasing production pressure. Additionally, higher temperatures worsened labor conditions, prompting some companies to schedule maintenance to reduce magnesium ingot supply.

The magnesium market showed a weak trend. The domestic downstream and end-user demand was sluggish, with small-volume transactions based on rigid demand. In addition, with the subdued demand caused by overseas summer holidays, the magnesium market is expected to remain weak in July. Some magnesium ingot producers plan to undergo maintenance to reduce supply. However, considering that some producers just resumed production at the end of last year and some conducted maintenance in April, the number of producers scheduling maintenance is expected to be limited, leading to relatively ample magnesium ingot supply. SMM expects July magnesium ingot production to remain stable at around 70,000 mt.

Magnesium Alloy

According to SMM, China's magnesium alloy production in June was 33,000 mt, up 28.5% YoY.

In June, the operating rates of downstream processing producers performed well. The aluminum prices were high while magnesium ingot prices fluctuated at low levels, significantly highlighting the cost-effectiveness of magnesium alloy, leading to a slight improvement in orders. Major magnesium alloy producers operated at full capacity, resulting in a 2.6% MoM increase in production. Downstream and end-user die-casting plants made purchases as needed. SMM expects that magnesium alloy production in July will remain stable at 33,000 mt.

Magnesium Powder

According to SMM, China's magnesium powder production in June was 5,859 mt, down 3.8% MoM but up 24.1% YoY.

Due to the sluggish orders and a strong wait-and-see sentiment among downstream companies amid price fluctuations of magnesium ingots, the production of magnesium powder fell. A representative from a large magnesium powder producer stated that the profits of steel mills were thin due to weak domestic economic situations, and the frequent price changes of magnesium ingots made downstream procurement more cautious. Considering that low-price magnesium ingots may stimulate an increase in magnesium powder orders, SMM expects domestic production of magnesium powder in July to remain at 6,000 mt.

Sponge Titanium

According to SMM, China's sponge titanium production in June was 23,700 mt, up 2.3% MoM.

In June, the new capacity of some major sponge titanium producers was gradually released, while the production of other companies held basically stable. Therefore, the sponge titanium production showed a slight increase.

The overall demand in the sponge titanium market did not meet expectations, and the spot market failed to reach end-users in a timely manner. After being smelted into titanium ingots, sponge titanium accumulated in the warehouses of titanium ingot producers, resulting in an unexpected increase in titanium ingot inventory and a continuous decline in titanium ingot prices. The increasing supply of sponge titanium and the negative feedback from the titanium ingot market together put significant pressure on sponge titanium prices. Additionally, the firm quotations of titanium ore and magnesium ingots further exacerbated cost pressures. Under the dual pressures of inventory and costs, sponge titanium producers may choose to reduce production. SMM expects sponge titanium production in July to decrease to 21,000 mt.

Titanium Dioxide

According to SMM, China's titanium dioxide production in June was 385,000 mt, down 4.7% MoM.

In June, as the titanium dioxide industry entered its traditional off-season, companies gradually slowed down their shipments, leading to significantly increased inventory pressure. Some titanium dioxide producers began to conduct maintenance due to the dual pressures of inventory and costs.

As the market chased an upward price movement and held back amid price downturn, downstream gradually slowed down the procurement pace. Currently, major producers have seen the inventory accumulation, with titanium dioxide companies holding a certain amount of stocks. Orders on hand temporarily supported the titanium dioxide prices to stay stable. However, downstream companies increasingly adopted a wait-and-see attitude, even delaying purchases, which may lead titanium dioxide companies to make concessions under inventory pressure. Given high costs, titanium dioxide companies opted for maintenance to alleviate inventory pressure. It is expected that titanium dioxide production in July will remain around 380,000 mt.

Light Rare Earths

In June, China's Pr-Nd oxide output was 7,325 mt, up 3.7% MoM, with the main increase reflected in Inner Mongolia and Guangxi. According to SMM, in June, the output of some separation plants increased, leading to a slight increase in the total output of Pr-Nd oxide. Among them, the output of Inner Mongolia increased by 21% MoM, and that of Guangxi increased by 7% MoM. It is understood that the current supply of Pr-Nd oxide remains relatively sufficient. Many traders have a pessimistic outlook on Pr-Nd oxide prices. While rare earth miners showed a low willingness to sell, downstream demand was poor. It is expected that Pr-Nd oxide output will slightly decrease in July.

In June, China's Pr-Nd alloy output was 5,994 mt, up 1.29% MoM. The overall Pr-Nd alloy output in June held stable, with little change in the operating rates of Pr-Nd alloy plants compared to May.

In July, the shipments of magnetic material plants increased. This is because the end-user market, after two months of wait-and-see stance, had limited raw material inventories and needed to restock. This is expected to bring positive demand for Pr-Nd alloy. It is anticipated that Pr-Nd alloy demand in July will improve compared to June, and Pr-Nd alloy output will slightly increase in July.

Medium-heavy rare earth

In June, China's production of dysprosium oxide was 214 mt, down 0.6% MoM, with the decline mainly reflected in Guangxi and Jiangsu. Domestic production of terbium oxide was 40.8 mt, flat MoM. Domestic production of gadolinium oxide was 298.9 mt, down 2% MoM, with the decline mainly reflected in Jiangsu and Jiangxi. Domestic production of holmium oxide was 42.9 mt, down 1% MoM, with the decline also mainly reflected in Jiangsu.

According to SMM, due to significant profit compression, miners showed a low willingness to sell, making it difficult for separation plants to procure raw materials. Some separation plants in certain regions chose to reduce production. Some miners reported that due to heavy rainfall in Myanmar, frequent landslides occurred, leading local miners to take a break. It is expected that normal mining operations will resume in September.

Molybdenum concentrate

According to SMM, China's molybdenum concentrate production in June was approximately 17,200 mt, down 1.8% MoM.

In June, molybdenum concentrate production held relatively stable, mainly due to the following factors. Domestic molybdenum market demand stabilised, and molybdenum prices stayed high, encouraging producers to maintain high output amid considerable profit margins. However, in regions like Hebei, tightened environmental protection-related controls limited the output of some private molybdenum mines, leading to a reduction in molybdenum concentrate production.

Entering July, environmental protection-related restrictions on the output of molybdenum mines will continue, and large molybdenum mines in Northeast China have maintenance plans. Therefore, it is expected that molybdenum concentrate production will continue to decrease slightly in July.

Ferromolybdenum

According to SMM, China's ferromolybdenum production in June was approximately 14,200 mt, down 8.8% MoM.

In June, the domestic ferromolybdenum market faced both high molybdenum prices and downward pressure on prices from the downstream molybdenum-containing steel market. This significantly compressed the profit margins for ferromolybdenum producers, with many smelters even experiencing losses. Under this dual pressure, ferromolybdenum smelters had to proactively reduce the acceptance of new orders to ease losses, resulting in a noticeable decrease in ferromolybdenum production.

Entering July, as the downstream market enters its traditional off-season, most molybdenum-containing steel producers plan to implement production cuts, which will further reduce the demand for ferromolybdenum. It is expected that ferromolybdenum production will continue to decrease slightly in July.

Silver

According to the SMM survey, in June, the production of #1 silver was 1,437.614 mt, of which mined silver accounted for 956.614 mt. Compared to May, silver production decreased by 121.719 mt, down 7.8% MoM but up 4.7% YoY.

In June, 10 companies saw an increase in production. There was an increase in the proportion of high-silver ore in the raw materials purchased in April and May. Some companies resumed production after maintenance in May. However, 16 companies experienced a decrease in production, mainly because silver smelters began maintenance in mid-June, with some extending maintenance into July. Therefore, silver production in June-July is expected to further decline. For scrap recycling companies, silver spot transactions were not active from mid to late May. There was some improvement in early to mid-June, with the widening basis in the third week increasing market willingness to purchase. Nevertheless, the cash flow pressure from H1 earnings results at the end of June led companies to sell spot silver to raise funds, resulting in an oversupply in the market and putting pressure on spot silver prices. Additionally, the high silver prices in June increased the financial pressure on recycling companies, causing them to reduce their purchase volumes to maintain cash flow stability.

The overall silver price in 2024 still has a competitive advantage compared to 2023. Although June and July are typically maintenance periods for silver companies, many smelters chose to reduce maintenance time and increase production due to high prices this year. As a result, June silver production increased YoY.

Silver Nitrate

In June, the production of silver nitrate continued to decline compared to May. The production of domestic silver nitrate producers with production and sales qualifications was 720 mt in June, down 18.2% MoM but up 13.2% YoY. The main reasons for the decline in June production were the overcapacity of downstream photovoltaic companies and intensified industry competition. Additionally, in June when the H1 earnings results period approached and silver prices were not at very low levels, silver nitrate producers showed a low purchase enthusiasm in order to ensure enough cash flows, producing based only on orders.

Antimony Ingot

According to the SMM survey, China's production of antimony ingot (including antimony ingot, crude antimony conversion, antimony cathode, etc.) in June was 6,559.32 mt, slightly up 0.94% MoM from 6,497.93 mt in May. Specifically, among the 33 producers surveyed by SMM, 14 producers halted production, 4 fewer than last month; 15 producers reduced production, 4 more than last month; and 4 producers maintained normal production, unchanged from last month. However, the SMM market survey found that in the second half of June, a large number of antimony smelters halted production again, including many flagship domestic producers. Among the 33 smelters surveyed by SMM in May, 19 smelters halted production. Of the other 14 producers, more are expected to halt production. Specifically, in Yunnan, SMM learned that Yunnan Muli Antimony Industry had halted production in June. Yunnan Wenye Nonferrous Metals plans to halt production in July due to a shortage of ore raw materials. In Hunan, Hsikwangshan Twinkling Star announced that its blast furnace would be shut down for maintenance on June 25, with the maintenance expected to last a month, during which no antimony ingot will be produced. In Lengshuijiang, except for Zhenqiang Antimony Industry struggled to maintain production and Zhirong Antimony Industry slightly resuming production in June after a six-month halt, all other producers halted production. Taojiang Jiutong Antimony Industry indicated that due to tight raw material supply, it might halt production at any time in July, and at the latest by August. Chenzhou Mining Group in Hunan plans a partial halt in July due to blast furnace maintenance, but Anhua Zhazixi Mining and Xinshao Chenzhou Antimony Industry have not yet indicated any halt. In Guangxi, almost all producers were shut down, including the two that still operated in May. Nandan Zhenghua Smelter recently halted antimony smelting, and there were rumors that Guangxi Wanshizhi Rare and Precious Metals has also partially halted production. In Guizhou, Guizhou Dongfeng Mining halted production in mid-June, and Dushan Yunxiao Antimony Industry plans to halt in early July, with only Guizhou Huaxing Metallurgy not yet indicating a halt. In other regions, only Gansu Zhaojin Precious Metals Smelting had no plans to halt antimony smelting. Many market participants believe that in the near future, the number of domestic antimony smelters in operation can be counted on two hands, a situation rarely seen in the past decade. Moreover, the resumption time for these idled producers is uncertain, and the impact on production is expected to be significant. Besides maintenance, the main reason for most halts is the lack of sufficient raw materials for smelting. If these producers cannot purchase large quantities of raw materials in the short term, the output will be limited to a low level even if they resume production. Market participants predict that antimony smelting production in Q3 this year may hit a new low. SMM expects that China's antimony ingot production in July will see a very significant sharp drop compared to June.

Sodium antimonate

According to an SMM survey of major sodium antimonate producers nationwide, China's production of first-grade sodium antimonate in June 2024 was 3,495 mt, a significant rebound of 11.31% MoM from 3,140 mt in May. After falling below 4,000 mt in April, the production continued to decline in May, approaching 3,000 mt. However, this downward trend was curbed in June, with the potential to exceed 4,000 mt again. Market participants generally indicated the rebound in June production within expectations, as there was a short-term rebound in demand from the PV glass sector.

Looking at the detailed data, among the 11 producers surveyed by SMM, two were in a state of shutdown or adjustment in May, while the production of other sodium antimonate producers stayed stable or increased. Therefore, the overall production rose. SMM expects that the production of first-grade sodium antimonate in July is likely to continue to rise, potentially approaching 4,000 mt.

Note: Since July 2023, SMM has been publishing the national sodium antimonate production data. Thanks to SMM high coverage rate in the antimony industry, the total number of surveyed sodium antimonate producers is 11, distributed across five provinces nationwide, with a total sample capacity exceeding 75,000 mt and a total capacity coverage rate as high as 99%.

Refined Bismuth

According to an SMM survey of bismuth producers nationwide, China's refined bismuth output in June was 1,812.953 mt, up 51.22% MoM. After two consecutive months of rebound in April and May, the output suddenly surged but decreased YoY. Market participants generally indicated the significant rebound in June output within expectations. As the central environmental protection inspection team was stationed in Hunan in May, the local bismuth output was affected. With the departure of the inspection team in June, many producers in Hunan resumed production, significantly increasing output. For the detailed data, among the 24 producers surveyed by SMM, only 2 saw a significant decline in output in June. 8 producers saw a significant increase in output, and 3 producers resumed production. This led to a substantial increase in overall bismuth ingot output in June compared to May. However, the bismuth raw material market remained tight. The raw material shortage is a potential cause of fluctuating future output. Therefore, SMM expects that the national refined bismuth output in July is likely to hold stable, with a possibility of a slight rebound. However, it may barely surpass 2,000 mt in the short term.

Note: Since October 2022, SMM has been publishing national refined bismuth output data. Thanks to SMM 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 and a total capacity coverage rate over of 99%.

Ammonium Paratungstate (APT)

According to SMM, China's APT production in June was approximately 9,800 mt, up 7.1% MoM.

In June, as environmental protection inspections in major APT production areas concluded, smelters began to gradually resume operations in mid-June, leading to an increase in APT production.

Heading into July, the domestic and international tungsten markets entered the off-season. Downstream demand for tungsten stayed stable, providing weak support for tungsten prices. Additionally, APT smelters are primarily fulfilling long-term orders from earlier periods, with few retail orders amid losses. Therefore, APT production in July is expected to stabilise.

LMO

SMM data showed that China's LMO output in June was 9,691 mt, down 34.03% YoY and 13.36% MoM. According to the SMM survey, raw material side, as the spot prices of lithium carbonate dropped, the industry adopted a wait-and-see stance. The market remained dominated by long-term contracts, with a subdued trading atmosphere. Demand side, in the traditional off-season, downstream battery cell manufacturers experienced sluggish transactions and the growth rate in the digital market slowed down. The new energy and energy storage markets were weak, with transactions mainly based on rigid demand and few new orders. Additionally, the overall LMO market was highly competitive, with price suppression and persisting overcapacity. Therefore, LMO producers were more cautious about scheduled production and mostly produced based on sales. It is expected that the price of lithium carbonate will continue to fluctuate in July, and downstream battery demand will remain in a low-growth state. The supply surplus will persist. With companies continuously operating at a loss, the overall LMO output is likely to further decline, with an estimated total output of 9,072 mt in July, down 9.93% YoY and 6.39% MoM.

Lithium carbonate

According to SMM statistics, China's lithium carbonate production in June was 66,243 mt, up 5.93% MoM and 61% YoY. From January to June, the cumulative production was 298,464 mt, up 46.71% YoY. By raw material, most lithium salt plants using spodumene maintained stable production in June. Except for a few lithium salt plants with reduced outsourcing orders, the operating rate of some leading lithium salt plants remained high. Together with the continuous ramp-up of production lines by some smelters and the switch from lepidolite to spodumene for lithium carbonate production, the output of spodumene smelters in June still showed a significant increase. For lepidolite smelters, although some smelters experienced varying degrees of losses in June, there was no significant reduction in production due to cash flow considerations. Additionally, the production of some leading lithium salt smelters was still in the ramp-up stage in June, and some small and medium-sized lepidolite smelters received increased outsourcing orders, leading to a rise in the total output of lithium carbonate from lepidolite in June. For salt lakes, most companies were at their production peak in June, with no recent changes in production, resulting in stable output.

Entering July, some lepidolite smelters and recycling companies are expected to reduce production due to losses or declining profits. However, with the continued increase in production by some spodumene smelters and the ramp-up of new capacities, the expected lithium carbonate production in China for July is 66,705 mt, up 0.7% MoM.

Currently, lithium salt plants maintain a strong sentiment to hold prices. Futures and spot traders are active recently, but downstream spot procurement remains sluggish. Downstream, some cathode material plants reported that their current lithium carbonate inventory is sufficient to sustain production for the month, and their long-term contracts and customer supplies remain stable, with only certain demand for spot purchases at low prices. However, some buyers reported difficulty finding cheap supplies, leading to a slight increase in market prices. Overall market trading sentiment has improved, but there is still a significant gap between the intended prices of upstream and downstream, resulting in low spot trading volumes. Future price trends will still need to focus on the market's expectations for concentrated restocking in August driven by the sales growth of NEVs.

Lithium hydroxide

In June 2024, China's lithium hydroxide production reached 35,220 mt, down 3% MoM and up 36% YoY. By raw material type, the production of lithium hydroxide by smelting process in June was 35,200 mt, down 1% MoM and up 53% YoY. The production of lithium hydroxide by causticizing method was 3,300 mt, down 17% MoM and down 34% YoY.

The production by causticizing method declined for the second consecutive month and the decline deepened. Lithium carbonate prices have fallen rapidly recently, while the decline in lithium hydroxide prices has slowed down after reaching around the 80,000 yuan/mt mark, narrowing the price spread between the two. However, for most causticizing method lithium salt plants, the cash profit of producing lithium hydroxide remains negative, ranging from negative 7,000 yuan/mt to negative 9,000 yuan/mt, making it economically unviable. Additionally, since June, the proportion of customer-supplied lithium hydroxide at ternary cathode material producers has increased significantly, inhibiting long-term contract and spot order demand from cathode materials producers. Consequently, there was a significant reduction in orders at some causticizing method companies, ultimately dragging down their production.

Demand side, although some large ternary cathode material companies have seen better-than-expected scheduled production due to a demand rebound, this is mainly because the inventory of cathode in the industry, as well as the inventory of cathode and finished battery cells at battery cell makers have returned to relatively normal levels after months of destocking. Together with the continuous decline in scheduled production by most ternary cathode material companies since April, reaching the 50,000 mt mark in June, the low base effect is evident. In June, the proportion of customer-supplied lithium hydroxide at ternary cathode materials producers surged, leading to an excess of lithium hydroxide at most cathode material companies. Some had to slow down pick-up of long-term contracts, stop spot purchases, and even sell their lithium hydroxide inventory externally. Short-term demand for lithium hydroxide is expected to remain low. SMM expects lithium hydroxide production in July to reach 33,170 mt, down 6% MoM and up 36% YoY.

Cobalt sulphate

In June, China's cobalt sulphate production was 5,646 mt in metal content, down 8% MoM and 25% YoY. The main reasons for the production decrease in June were the significant decline in downstream demand for ternary cathode precursors, leading to reduced scheduled production downstream and weakened demand for cobalt sulphate. Additionally, due to high market inventory and continuous decline in spot prices, the losses of cobalt sulphate smelters intensified, resulting in significant production cuts.

In July, although downstream scheduled production is expected to increase, the demand will be more concentrated on high-nickel materials, limiting the recovery of cobalt demand. Therefore, the expected production in July is about 5,691 mt in metal content, with little MoM fluctuation and a 32% YoY decrease.

Co3O4

In June, China's Co3O4 production was 7,590 mt, up 3% MoM and down 4% YoY. The increase in June production was mainly due to the end of maintenance by some companies in June. Although the conventional market is highly competitive, there is still a certain demand in the high-voltage market, and the operating rate of high-voltage Co3O4 companies remained relatively stable, resulting in MoM increase in production.

In July, with the release of new smartphone models in Q3 and the impact of current low cobalt prices, downstream companies may have an intention to stockpile in advance, leading to increased demand for Co3O4. Therefore, Co3O4 production in July is expected to maintain an upward trend, reaching about 7,790 mt, up 3% MoM and 8% YoY.

Ternary cathode precursor

In June 2024, China's ternary cathode precursor production was about 58,652 mt, down 8% MoM and 21% YoY. From January to June, the cumulative production was 411,556 mt, up 12.01% YoY. Supply side, in June, the negative feedback from inventory adjustments at the battery cell end affected the ternary cathode materials, reducing their procurement of precursors. Together with the declining prices of metal salts, precursor companies were less active in raw material procurement. The combined impact led to a significant decline in scheduled production of ternary cathode precursors. Domestic demand weakened overall. Overseas demand showed a divergent trend but remained generally weak.

In July 2024, demand side, after the inventory adjustments at leading battery cell companies, they resumed just-in-time procurement. Supply side, metal salt prices gradually stabilized, and some precursor companies resumed raw material stockpiling. The expected production of ternary cathode precursors in China for July 2024 is 61,384 mt, up 5% MoM and down 22% YoY.

Ternary cathode materials

In June 2024, China's ternary cathode material production was 49,345 mt, down 5% MoM and 11% YoY. In H1, the YoY increase was 15%.

Supply side, in June, the overall scheduled production of ternary cathode material plants slightly declined. With lithium prices still falling in June, most material plants, facing mid-year earnings report pressure, chose to cautiously produce and destock to reduce inventory impairment risks. By material type, the proportion of 5-series was 26%, 6-series was 33%, and 8/9-series was 37%, with the proportion of high-nickel materials declining MoM. In the digital and e-bike market, according to SMM statistics, the production of ternary cathode materials in this segment was 7,965 mt in June, accounting for about 17% of the total ternary cathode material production, slightly down from May. In June, manufacturers mainly produced for previous orders. In terms of market competition, Ruixiang New Materials, which mainly produces medium-nickel materials, ranked first again in June, indicating stable and positive domestic demand for medium-nickel from CATL. The second and third places were Ronbay and Bamo. The overall market CR3 was 39%, CR5 was 53%, and CR10 was 76%, with no significant changes from May. Demand side, in the NEV market, June car sales data showed an upward trend. According to preliminary data from CPCA, retail sales of new energy passenger vehicles increased by 7% MoM. However, in June, battery cell production and car sales diverged again, mainly due to battery cell manufacturers controlling inventory at mid-year, with ternary battery cell scheduled production down by 10%, leading to a decline in procurement demand for ternary cathode materials.

In July 2024, China's ternary cathode material production is expected to be 57,400 mt, up 16% MoM and down 1% YoY. From January to July, the YoY increase might be 15%. Supply side, in July, ternary cathode material production is expected to rise, mainly due to a good recovery in scheduled production by leading high-nickel ternary material manufacturers. Except for some manufacturers with declining orders and scheduled production, the overall scheduled production of major domestic ternary cathode material manufacturers showed a slight recovery. By material type, the proportion of 5-series was 23%, 6-series was 30%, and 8/9-series was 43%, with the proportion of 5-series slightly declining and 8/9-series increasing. In terms of market competition, Ronbay will regain the top position, with a market share exceeding 20%, followed by Ruixiang and Brunp. The overall market CR3 might be 47%, CR5 at 63%, and CR10 at 79%, showing a significant increase in market concentration compared to June, indicating that the material industry is in a reshuffling period.

Analyzing the reasons for the increase in July, besides order increase from battery makers, which is linked to car sales, other factors include: 1) Inventory factors: In June, both battery cell and material plants chose to control inventory, with inventory levels below the safety threshold. After the mid-year financial reporting period, battery cell and material plants will rebuild healthy inventories in July. 2) Raw material prices: As of July 5, the average price of lithium carbonate was 90,630 yuan/mt, down 7% from the average price in June. With lower raw material prices in July and expectations of a small rebound in lithium prices in H2, some material manufacturers may increase production.

Demand side, in the EV battery market, the production of ternary EV batteries in July is expected to increase by 6% MoM. The procurement demand for materials by leading domestic battery cell manufacturers has improved, with some restocking activities. Additionally, overseas EV market demand showed a divergent trend, with procurement demand improving for leading battery cell manufacturers and weakening for second-tier battery cell manufacturers. In the consumer and e-bike market, the digital market entered the traditional off-season in July, and the demand for ternary materials in the two-wheeler market declined due to new technical regulations. Overall, market demand is expected to rise.

Iron phosphate

In June, China's iron phosphate production was 147,800 mt, down 10% MoM and up 21% YoY. The production in June significantly decreased, mainly due to downstream production cuts and destocking at the end of the quarter, as well as production cuts by iron phosphate companies due to cost pressures. On the cost side, the price of industrial ammonium stayed at a high level in June, and the price of phosphoric acid was also stable, keeping the cost of iron phosphate high. However, the price of iron phosphate remained stable in June, defying previous expectations for significant price increase. Supply side, iron phosphate companies, due to previous significant losses and limited demand in June, adopted a conservative approach to scheduled production, resulting in a significant decline in output. Demand side, the demand for iron phosphate in June also declined compared to May, which was consistent with previous expectations.

LFP

In June, China's LFP production was 180,020 mt, down 9% MoM and up 28% YoY. Supply side, leading companies that reported high production in early Q2 saw a decrease in June, primarily focusing on reducing inventory. However, some LFP producers experienced an increase in orders due to changes in customer demand. Demand side, June was a critical period for downstream end-users and battery cell makers to reduce inventory. Orders for upstream LFP producers declined, and LFP was in the off-season. Due to weakened demand and efforts to reduce inventory and boost sales, a price war to grab orders was inevitable in June.

Feedback from LFP producers in July indicated that the situation would not differ much from June, with no significant positive news in the market. The overall trend is expected to decline slightly, with an estimated LFP production of 172,960 mt in July, down 4% MoM and up 25% YoY.

LCO

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.

LMO

SMM data showed that China's LMO output in June was 9,691 mt, down 34.03% YoY and 13.36% MoM. According to the SMM survey, raw material side, as the spot prices of lithium carbonate dropped, the industry adopted a wait-and-see stance. The market remained dominated by long-term contracts, with a subdued trading atmosphere. Demand side, in the traditional off-season, downstream battery cell manufacturers experienced sluggish transactions and the growth rate in the digital market slowed down. The new energy and energy storage markets were weak, with transactions mainly based on rigid demand and few new orders. Additionally, the overall LMO market was highly competitive, with price suppression and persisting overcapacity. Therefore, LMO producers were more cautious about scheduled production and mostly produced based on sales. It is expected that the price of lithium carbonate will continue to fluctuate in July, and downstream battery demand will remain in a low-growth state. The supply surplus will persist. With companies continuously operating at a loss, the overall LMO output is likely to further decline, with an estimated total output of 9,072 mt in July, down 9.93% YoY and 6.39% MoM.

Output

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