SMM analysis on October domestic lithium Carbonate market: downstream production schedules remain high, and supply slightly increases, narrowing the destocking of lithium carbonate

SMM, Oct 15: Supply side: Lithium carbonate spot prices continue to weaken, and most lithium chemical smelters have stabilized their operations after adjustments, with no significant change in output. Due to weather factors, salt lake lithium carbonate production decreased in September and is expected to maintain September levels in October. Driven by downstream demand, some lithium chemical smelters will slightly increase production schedules for spodumene. Some smelters plan to switch from lithium hydroxide to lithium carbonate, expecting some growth in spodumene lithium carbonate production. Lepidolite production is expected to decline due to the shutdown of major lithium chemical smelters in Jiangxi in October, and even though some non-integrated smelters increase tolling agreement, it is difficult to compensate for the reduction. The recycling side remains relatively optimistic, driven by increased processing orders for scrap from major battery makers. Overall, China's total lithium carbonate production in October is expected to increase slightly, up 1%-2% MoM. According to Chilean customs data, after four consecutive months of MoM export declines, Chile exported 16,600 mt of lithium products to China in September, up 37% MoM. Considering shipping cycles, China's lithium carbonate imports in October are expected to recover.

Demand side: With a 19% MoM increase in LFP production in September, LFP is expected to maintain high production schedules in October, similar to September levels. Although ternary material production schedules decrease, their market share does not significantly impact total lithium carbonate demand. Overall, downstream demand remains at high September levels. However, considering the potential for significant LFP production cuts in November and the current weak stocking willingness of material plants, downstream procurement demand is expected to weaken in late October.

From the supply-demand and price performance forecast, domestic lithium carbonate in October will continue the destocking state of September. Downstream demand remains at high September levels. Domestic total lithium carbonate production shows a slight increase, and considering the recovery in import levels in October, supply is expected to grow. Therefore, compared to September, the destocking rate in October may narrow. From the actual supply-demand situation, the supply surplus of lithium carbonate by the end of this year remains difficult to change, and lithium carbonate spot prices still have room to decline. Considering some lithium chemical smelters are under cost pressure, the sentiment to stand firm on quotes may persist. Due to the risk of varying quality in spot goods held by futures and spot traders, some material plants will increase their proportion of purchases from lithium chemical smelters, which may support the lithium carbonate price decline to some extent, showing range-bound fluctuations. However, considering the expectation of reduced downstream demand in November and the current lack of significant stocking willingness from downstream material plants, the lithium carbonate spot market will find it difficult to maintain the previous relatively optimistic state.