【SMM Analysis】Lithium Battery Material Supply Increased MoM in March, New Energy Market Gradually Recovered

SMM April 1 News: In March 2025, China's total lithium carbonate production hit a record high, up 23% MoM and 85% YoY. The main reasons were the resumption of normal production at upstream lithium chemical plants after maintenance and the continuous ramp-up of some production lines, which significantly boosted domestic lithium carbonate output in March. By raw material type, the total production of lithium carbonate derived from spodumene increased by 24% MoM. Most lithium chemical plants resumed normal production after the Chinese New Year maintenance, and the continuous ramp-up of some lower-cost production lines significantly boosted the output of lithium carbonate derived from spodumene. Although some small and medium-sized lithium chemical plants using lepidolite reduced production due to the continuous decline in lithium carbonate prices, the output of lithium carbonate derived from lepidolite still saw a significant increase, up 26% MoM, supported by the strong supplementation from top-tier lithium chemical plants. Although temperatures in salt lake regions remained low, production increased compared to the previous low levels, with an overall increase of 13% MoM. Lithium chemical recycling plants generally resumed production in March, but due to the low base, the MoM increase was significant, at about 31%. Although the persistent surplus of lithium carbonate is difficult to reverse, dragging down prices, the current production structure is still dominated by integrated enterprises, with higher and more stable operating rates. With the continuous ramp-up of some relatively lower-cost production lines, it can supplement the high marginal cost reductions. Overall, domestic lithium carbonate production is expected to remain stable at high levels in April, with fluctuations of 1%-2%. According to SMM, the post-holiday resumption of lithium hydroxide production saw a significant increase this month, with a growth rate of over 25%, but a YoY decrease of over 5%. From the raw material perspective, the smelting sector increased by over 25%, basically flat YoY. Most producers resumed normal production after the holiday, with a considerable supply increase. However, due to the slow growth in downstream demand for lithium hydroxide and the generally high inventory levels in the smelting sector, some producers shifted production towards lithium carbonate, resulting in a slight decrease in output compared to pre-holiday levels. Causticisation production increased by over 30% MoM, but decreased by nearly half YoY. Some producers saw a slight increase after the holiday, and the ramp-up of new production lines contributed to a noticeable MoM increase, but the overall operating rate remained low, limiting the contribution to total supply. Due to the high concentration of lithium hydroxide supply, top-tier producers maintained stable production recently, so April's output is expected to be basically flat with March, with a YoY decrease of nearly 30%. In March 2025, cobalt sulphate production increased by 54% MoM. This was mainly due to the impact of the DRC event, which led to rapid price increases, improved profitability of cobalt sulphate products, and the release of new capacity, resulting in a significant MoM increase in output. In April, most producers maintained high output levels, and new capacity continued to ramp up. Although some producers slightly reduced production due to insufficient raw material reserves, the overall trend remained upward, with April output expected to increase by 3% MoM. In March 2025, Co3O4 production saw slight increases both MoM and YoY. This growth was mainly attributed to the low inventory levels of downstream LCO producers, who urgently needed to purchase, thus driving stable production at Co3O4 producers. Additionally, news of cobalt exports raised concerns about price increases among LCO producers, leading to some advance purchasing, further boosting the activity in the Co3O4 market and driving increased production schedules at some producers. In April 2025, driven by downstream demand, Co3O4 producers are expected to receive more orders, continuing to achieve MoM and YoY growth. In March 2025, China's ternary cathode precursor production increased by 19.75% MoM but decreased by 10.57% YoY. By series, the 5-series accounted for 20%, the 6-series for 37%, and the 8-series for 33%, with a slight increase in the 6-series precursor share. On the supply side, the higher number of natural days in March and the recovery from the holiday and shutdown impacts in February brought overall supply back to pre-holiday levels. On the demand side, the sharp increase in raw material prices in March led some ternary material producers to stockpile in anticipation of further price increases, driving short-term precursor order increases. However, in the long term, the uncertainty of raw material price fluctuations and the continued pressure from LFP on the ternary market kept overall precursor demand weak. In April, ternary precursor production is expected to increase by 3.49% MoM. In March 2025, ternary cathode material production increased by 19.99% MoM but decreased by 7.59% YoY. The industry's overall operating rate was 39%, up from February. By series, the 5-series accounted for 22%, the 6-series for 29%, and the 8-series for 43%, with no significant changes in the overall structure. On the supply side, the higher number of natural days in March and the recovery from the holiday and shutdown impacts in February led to increased production schedules. On the demand side, the sharp increase in raw material prices in March led some battery cell manufacturers to stockpile in anticipation of further price increases, driving overall market demand growth. Additionally, demand from some overseas battery cell manufacturers rebounded in March, boosting domestic orders. Looking ahead to April, market demand is expected to continue growing, but the growth rate may slow, with ternary cathode material production expected to increase by 7.22% MoM. In March, domestic iron phosphate production increased by 10% MoM and 81% YoY. On the supply side, most iron phosphate producers increased production schedules compared to February, significantly boosting supply. Some producers had ample orders, operating at full capacity. Additionally, new entrants in the iron phosphate market are gradually increasing capacity, with future production expected to continue rising. On the demand side, LFP market demand began to grow steadily in March. However, some producers saw order reductions due to price and project matching issues, but others with significant product and price advantages saw order increases, especially those requiring externally purchased iron phosphate, driving overall demand growth. On the cost side, the spring fertilizer preparation season in March led to a sharp increase in the price of industrial-grade MAP, a key raw material for ammonium-based iron phosphate, significantly raising production costs and prompting producers to consider price increases in April. In April, as the lithium battery market enters the peak season, iron phosphate production schedules are expected to continue increasing, with production expected to grow by 5% MoM and 68% YoY. In March, China's LFP production increased by 13.4% MoM and about 89% YoY, with the industry's operating rate rising to 57%. On the supply side, March is traditionally a peak season, leading to a significant rebound in LFP production, though the growth rate fell short of expectations. The supply structure saw slight adjustments, with overall iron phosphate prices rising in March, leading to strong price-firming sentiment among top-tier LFP material producers. However, downstream battery cell manufacturers shifted some orders from top-tier to mid-tier producers to reduce costs, contrasting sharply with February's supply structure. On the demand side, power end-use demand performed well in March, with significant production increases at downstream battery cell manufacturers, but overall procurement volume slightly declined, reducing LFP material inventory at battery cell manufacturers, indicating that downstream enterprises are optimizing inventory and cost control while growing demand. Looking ahead to April, downstream demand growth is expected to slow, with LFP production growth likely to be modest. Additionally, LFP material producers generally expect higher processing fees in Q2, leading to new price negotiations with downstream battery cell manufacturers. In March 2025, domestic LCO production increased by 14% MoM, mainly due to the accelerated resumption of the industry chain after the Chinese New Year holiday, with top-tier producers resuming production and driving supply recovery. Industry concentration remained high, with CR5 at 85%, and top-tier producers dominated the market with long-term raw material contracts and integrated cost advantages. On the raw material side, Co3O4 prices surged due to the DRC's suspension of cobalt ore exports, leading to significant LCO price increases in March. On the demand side, March is the traditional 3C new product preparation period, with demand for smartphones, tablets, and other end-use products rebounding MoM, driving increased procurement orders at battery cell manufacturers. In April, demand growth is expected to slow, with LCO production expected to increase by 3% MoM. SMM New Energy Research Team Cong Wang 021-51666838 Rui Ma 021-51595780 Yanlin Lyu 021-20707875 Disheng Feng 021-51666714