[SMM Analysis] Cathode material production rose MoM in May, while end-use demand remained sluggish

SMM News on June 4:

Lithium Carbonate

In May 2025, SMM's total lithium carbonate production decreased by 2% MoM and increased by 15% YoY. Due to the significant decline in lithium carbonate prices in May, the monthly average price fell by over 10% MoM compared to April. Some non-integrated lithium chemical plants, unable to withstand the cost pressure, reduced or halted production. Coupled with the production reductions from some lithium chemical plants due to production line maintenance, the total lithium carbonate output in May showed a slight decline, though it remained at a high level. By raw material type, the total production of lithium carbonate derived from spodumene decreased by 4% MoM in May. Although some lithium chemical plants had reduced their output due to cost issues or production line maintenance, the stable production of integrated enterprises provided strong support for the output of lithium carbonate derived from spodumene, limiting the decline. The total output of lithium carbonate derived from lepidolite increased slightly, up 2% MoM, benefiting from the continuous capacity ramp-up of leading lithium chemical plants. The rising temperatures in salt lake regions boosted lithium carbonate production, with the overall output increasing by 3% MoM. The total output from recycling plants decreased significantly in May, down 16% MoM. The main reason was that, amidst the sharp decline in lithium carbonate prices, the prices of scrap and black mass did not fall in tandem, leading to severe losses for recycling lithium chemical plants and a substantial reduction in output.

Lithium Hydroxide

According to SMM data, lithium hydroxide production remained basically flat MoM this month but decreased by over 20% YoY. By raw material classification, most production lines at smelting enterprises operated relatively stably. However, against the backdrop of the continuous and significant decline in lithium carbonate prices, some enterprises adjusted their flexible production line structures, resulting in changes to the production ratio of carbon-hydrogen structures. In the causticisation segment, after several months of capacity ramp-up, the output and quality of some enterprises had stabilized, contributing a certain increase to the overall output. This led to a MoM increase of approximately 30% in causticisation segment output, though it still decreased by 22% YoY. Looking ahead to June, individual smelting enterprises are expected to halt production for technological transformation, while the capacity ramp-up of new production lines at some enterprises will supplement the overall output. Overall, after offsetting the increases and decreases, the total output is expected to remain basically flat MoM and decrease by approximately 25% YoY.

Cobalt Sulphate

In May 2025, cobalt sulphate production decreased by 13% MoM. Recently, cobalt sulphate prices have declined, and the economic viability of cobalt sulphate production has also decreased, leading to a slight drop in the capacity utilisation rate of smelters. Consequently, cobalt sulphate production decreased MoM this month. Entering June, with cobalt intermediate product prices remaining high, the economic viability of cobalt sulphate production is relatively low. It is expected that the output of cobalt sulphate from ore will further decline. However, with the growth in the recycling material segment, the overall cobalt sulphate output is expected to remain largely unchanged. It is projected that cobalt sulphate output will decrease by approximately 1% MoM in June.

Co3O4

In May 2025, the production of Co3O4 increased both MoM and YoY. In terms of supply, despite the overall downward trend in spot prices of Co3O4 in May, prices remained at a relatively high level compared to the previous period, with a relatively optimistic profit margin. As a result, the operating rates of some enterprises increased, and production enthusiasm was high, driving a slight increase in market supply. From the perspective of demand, LCO enterprises maintained a strong wait-and-see attitude, focusing on just-in-time procurement and fulfilling existing orders, with relatively stable demand. It is expected that by June, the issue of tight raw material supply will remain difficult to resolve. Co3O4 enterprises will adopt a more cautious approach to production scheduling, with some enterprises potentially experiencing significant production cuts. Therefore, the overall market supply is expected to decline.

Ternary Cathode Precursor

In May 2025, the production of SMM ternary cathode precursors decreased by 3.99% MoM and increased by 4.53% YoY. In terms of series structure, 5-series accounted for 19%, 6-series accounted for 42%, and 8-series accounted for 28%. Among them, 6-series products, due to their significant cost advantages, have gained more favour from producers amid the ongoing price war in the terminal automotive market. Their market share continues to rise, squeezing the shares of 5-series and 8-series products. In the NEV market, domestic terminal vehicle sales fell short of expectations, with overall performance being weak. The overseas market also showed signs of weakness, accompanied by a certain degree of order transfer. In the consumer market, the end-use demand for downstream 3C and small power terminals was moderate. However, influenced by the concentrated release of orders in the previous two months, the precursor sector is currently in a destocking phase. Although orders remained stable in May, there is still uncertainty regarding the demand trend in June. Overall, the performance of the ternary cathode precursor market in May was poor. Looking ahead to June, the destocking trend in the consumer market is expected to continue, with orders potentially declining. However, in the NEV market, some new car models scheduled for launch may drive producers to stockpile in advance, potentially boosting the production schedules of some precursor enterprises. Based on a comprehensive assessment, it is expected that the production of ternary cathode precursors will increase by 1.63% MoM in June.

Ternary Cathode Material

In May 2025, the production of SMM ternary cathode materials increased by 3.52% MoM and 23.91% YoY. The overall industry operating rate reached 43% that month, further rebounding from April. In terms of series structure, 5-series accounted for 16%, 6-series accounted for 35%, 8-series accounted for 33%, and 9-series accounted for 14% in May. Among them, the market share of 5-series ternary cathode materials significantly decreased due to rising costs and lower-than-expected sales of some traditional car models in the downstream market. Leveraging its dual advantages in cost and performance, the share of 6-series materials further increased, squeezing the market space of 8-series materials. Meanwhile, the market share of 9-series materials rose due to an increase in overseas orders. In the NEV market, overall terminal auto sales performance has been relatively mediocre. Coupled with the continuous decline in lithium carbonate prices, the market's overall sentiment towards stockpiling has become cautious. In the consumer market, demand for 3C and small power terminals has performed well, with top-tier enterprises in consumer cathode materials maintaining a consistently high capacity utilisation rate. Looking ahead to June, the market remains bearish on raw material prices, and production scheduling intentions are becoming more conservative. Additionally, the peak period for stockpiling ahead of the "618" shopping festival in the consumer market has concluded, and the market has entered a destocking phase. It is expected that ternary cathode material production will decline by 1.17% MoM in June.

Iron Phosphate

In May, the domestic iron phosphate market performed steadily, with production increasing by 2% MoM and surging by 38% YoY. On the supply side, the resumption of production by integrated LFP enterprises drove an increase in self-supplied iron phosphate production. Enterprises with raw material cost advantages secured more orders due to stable production lines. Most enterprises with stable prices maintained production levels similar to the previous month. On the demand side, downstream demand for LFP materials rebounded compared to April. In terms of costs, prices of industrial-grade MAP and phosphoric acid remained stable, while ferrous sulphate prices rose, keeping iron phosphate production costs at a high level. Entering June, with the arrival of the mid-year target push period, enterprises will strive to capture market share by offering discounts and promotions to boost sales volumes. Simultaneously, new capacities will be commissioned sequentially, and downstream validation work will commence. It is expected that iron phosphate production will increase by 4% MoM and 59% YoY in June, potentially intensifying market competition further.

LFP

In May 2025, China's LFP production increased by approximately 6.7% MoM and 43% YoY, with the industry's overall operating rate at around 56%. In the ESS sector, overseas ESS orders faced a certain reduction expectation in early May due to the impact of the US's reciprocal tariff policy, leading to a slowdown in the production pace of some material factories. However, after the negotiations between China and the US concluded in mid-May, the reciprocal tariff was significantly reduced from 125% to 10% within the next 90 days. This tariff adjustment prompted downstream battery cell manufacturers to accelerate production and rush to export, thereby driving the recovery of orders for LFP material factories and leading to a more active production environment. In the NEV sector, the overall production scheduling performance of material factories shifted from strong to weak this month. Auto sales maintained a good level at the beginning of the month but slumped from mid-month onwards. Downstream battery cell manufacturers gradually reduced their orders for LFP cathodes, resulting in some material factories ultimately experiencing production and delivery shortfalls compared to expectations. Looking ahead to June, the LFP market will face demand differentiation. Affected by the traditional off-season for auto sales, it will be difficult for demand in the NEV sector to achieve breakthroughs, and production scheduling expectations for LFP materials and battery cells are expected to decline. However, in the ESS market, following the tariff reduction, downstream battery cell manufacturers will continue to produce actively and rush to export, with demand maintaining a strong growth momentum. Overall, the production schedule increase for LFP materials in June is limited.

LCO

In May 2025, LCO production increased by 6% MoM. On the demand side, driven by the national subsidy policies this year, the overall performance of the consumer end-use market improved in H1, with robust downstream demand sustaining strong procurement needs for LCO. On the supply side, LCO prices are mainly influenced by the costs of Co3O4 and lithium carbonate. The oversupply situation in the lithium carbonate market is expected to persist for an extended period. In the cobalt market, there is widespread anticipation regarding the finalization of mining policies in the DRC by month-end, resulting in a relatively mediocre market sentiment. Against this backdrop, LCO producers are adhering to a sales-based production strategy, maintaining a relatively conservative inventory level. In June, downstream consumer market demand is expected to remain favorable, with leading battery cell enterprises anticipated to sustain high procurement volumes for key LCO materials. Supported by this, it is expected that LCO enterprises' production schedules will remain basically flat compared to May, with a possible slight increase of approximately 1% MoM.

SMM New Energy Research Team

Wang Cong 021-51666838

Ma Rui 021-51595780

Lv Yanlin 021-20707875

Feng Disheng 021-51666714