【SMM Analysis】China's total production of lithium carbonate increased 8% MoM in November and was up 49% YoY.

In November, China’s total production of lithium carbonate steadily increased, up 8% MoM and up 49% YoY. Stimulated by continuously rising demand and the arbitrage opportunities in the futures market, the operating rate of upstream lithium lithium smelters was boosted overall.

By raw material type, total production of lithium carbonate derived from spodumene increased 7% MoM in November. The increase mainly came from the ramp-up of production lines converting lithium hydroxide to lithium carbonate, and some lithium chemical smelters also increased production driven by profits in the delivery market. After several months of MoM decline, the trend of lithium carbonate derived from lepidolite reversed, increasing 23% MoM. The increase was not only due to generally improved demand but also supplemented by the output from newly resumed smelters. The output of lithium carbonate derived from salt lake slightly decreased by 6% MoM due to weather impacts. The output of lithium carbonate from recycling continued to rise, up 13% MoM, driven by the increasing orders under tolling agreements from leading battery cell manufacturers for waste battery processing.

Entering December, the production schedule on the downstream cathode material plants maintained the previously high production levels. The positive sentiment in upstream smelter production also rose in tandem. It is expected that domestic total production of lithium carbonate in December will increase by 8%-10% MoM, with the incremental part still coming from spodumene conversion.

From the current spot market transaction situation of lithium carbonate, the increase in downstream consumption led to spot order purchases of lithium carbonate, significantly raising the center of spot transaction prices in November. As the year-end period approaches, although the downstream production schedule remains optimistic, the current sentiment for purchasing is weak due to year-end inventory control considerations. Upstream smelters have a strong sentiment to stand firm on quotes as the long-term contract negotiation period approaches. Considering the strong supply and demand pattern for lithium carbonate and the accumulated inventory levels, it is expected that spot prices of lithium carbonate will continue to show sideways movement.