[SMM Analysis] In June, cathode material production saw a slight MoM increase, with notable differences in demand from the NEV and ESS sectors

SMM News on July 2:

Lithium Carbonate

In June 2025, the domestic lithium carbonate market saw a significant increase in production. The total monthly production of lithium carbonate rose by 8% MoM and 18% YoY. The main drivers of the production increase were as follows: With the emergence of hedging opportunities in the futures market, multiple lithium chemical plants that had previously been operating at low rates resumed production, leading to a noticeable rebound in the overall output level of the industry. By raw material type, the total production of lithium carbonate derived from spodumene in June increased by 11% MoM. The increase was partly due to the recovery from maintenance at leading lithium chemical plants and partly due to the significant increase in output from non-integrated lithium chemical plants with low operating rates, stimulated by hedging opportunities in the futures market. Therefore, the production increase of lithium carbonate derived from spodumene was significant. The total output of lithium carbonate derived from lepidolite continued to increase, rising by 9% MoM, thanks to the continuous ramp-up of production at leading lithium chemical plants and the incremental output from non-integrated lithium chemical plants after hedging. The total output of lithium carbonate derived from salt lake increased by 7% MoM, reaching a yearly high amid suitable temperature conditions. The total output of recycling plants in June continued to decrease significantly, dropping by 7% MoM. The main reason was that, amid a sharp decline in lithium carbonate prices, the prices of scrap and black mass remained relatively firm, resulting in severe losses for recycling lithium chemical plants and a significant reduction in output.

Lithium Hydroxide

According to SMM data, the production of lithium hydroxide decreased by approximately 5% MoM and 31% YoY this month. Under the current relatively stable upstream supply structure, most lithium chemical plants produced based on sales and adjusted the production structure of carbon and hydrogen under the influence of market prices, resulting in a certain decrease in the overall lithium hydroxide smelting output MoM. In the causticisation segment, some enterprises experienced slow ramp-up of new production lines and partial adjustments to production raw materials in the short term, leading to a 14% MoM decrease and a 19% YoY decrease in the causticisation segment's output amid a relatively small overall base. Looking ahead to July, individual smelting enterprises are expected to halt production for technological transformation as planned, but at the same time, the ramp-up of new production lines at some enterprises will supplement the overall output. Overall, after offsetting the increases and decreases, the overall output is expected to remain flat or slightly weak MoM, with a decrease of approximately 26% YoY.

Cobalt Sulphate

In June 2025, SMM's cobalt sulphate production decreased by 9.71% MoM and increased by 3.80% YoY. From the perspective of production raw material sources, cobalt intermediate products accounted for approximately 59%, MHP accounted for approximately 19%, and recycling materials accounted for approximately 22%. Due to the extension of the DRC's ban, the prices of cobalt intermediate products continued to rise, and the inventory of cobalt intermediate product raw materials at smelting enterprises gradually decreased. Currently, recycling materials and MHP are gradually squeezing out cobalt intermediate products. In terms of supply, from early to mid-May to June, the spot price of cobalt sulphate generally showed a continuous downward trend. During this process, some cobalt sulphate smelters gradually chose to cut production or even suspend operations due to weak production economics or shortages of raw material inventories. After the extension policy in DRC was announced on the 21st, upstream quotes for cobalt sulphate returned to near the previous highs, and profits were somewhat restored. However, as downstream players remained in a wait-and-see mode during this period, the market remained relatively sluggish, so smelters maintained steady production. In terms of demand, downstream orders for ternary cathode precursor and Co3O4 enterprises still showed no significant improvement. They tentatively chose to wait and see the market, focusing on digesting previous inventories. A few enterprises with shorter days of raw material inventories mainly made just-in-time procurement, and demand was relatively stable. It is expected that by July, the issue of tight raw material supply for enterprises will become more prominent. Cobalt sulphate enterprises will become more cautious in their production schedules, and individual enterprises may experience more obvious production cuts or even suspensions. It is expected that cobalt sulphate production schedules in July will decrease by 7.93% MoM.

Co3O4

In June 2025, Co3O4 production decreased by 8% MoM and increased by 24% YoY. In terms of supply, from early to mid-June, the spot price of Co3O4 generally showed a downward trend. After the extension policy in DRC was announced on the 21st, Co3O4 prices began to rise, and profit margins were relatively optimistic. However, the overall market remained relatively sluggish recently, and the overall production of Co3O4 enterprises slightly declined. In terms of demand, LCO enterprises maintained a strong wait-and-see attitude, focusing on just-in-time procurement and fulfilling existing orders. Demand was relatively stable. It is expected that by July, the issue of tight raw material supply will become more prominent. Co3O4 enterprises will become more cautious in their production schedules, and individual enterprises may experience more obvious production cuts. Therefore, the overall market supply is expected to further decline.

Ternary cathode precursor

In June 2025, SMM ternary cathode precursor production increased by 2.3% MoM and decreased by 3.18% YoY. In terms of series structure, the proportion of 5-series precursors was 16.76%, 6-series was 42.33%, and 8-series was 28.34%. Among them, 6-series products, with their significant cost advantages, gained more favour from producers amid the ongoing price war in the terminal automotive market. Their market share continued to increase, exerting certain pressure on 5-series and 8-series products. In the NEV market, domestic terminal vehicle sales fell short of expectations, with overall weak demand. Only stockpiling demand for a few new car models boosted a certain number of orders. The overseas market also performed weakly, with some orders being transferred. In the consumer market, demand in the small power market in June became more mediocre compared to the previous two months. Coupled with the overall downward trend in raw material prices during the month, this had a certain negative impact on market transactions. Meanwhile, June serves as a mid-year period, and some enterprises conducted destocking operations to improve cash flow. Looking ahead to July, downstream demand is expected to remain generally weak, but there will be periodic restocking activities. The market is expected to recover slightly, with ternary cathode precursor production scheduled to increase by 1.14% MoM in July.

Ternary cathode material

In June 2025, SMM ternary cathode material production increased by 0.93% MoM and 31.54% YoY. The overall industry operating rate was 44%, slightly rebounding from May. In terms of series structure, 5-series accounted for 14.76%, 6-series for 35.82%, 8-series for 31.74%, and 9-series for 15.28%. The market share of 5-series ternary cathode materials declined significantly due to rising raw material costs and reduced performance competitiveness. 6-series materials continued to expand their market share while balancing cost and performance advantages. 8-series materials, mainly used in overseas NEV markets, saw a slight decline in their share due to weaker-than-expected overseas auto sales and the market not yet entering peak season. 9-series materials, benefiting from order transfers, have seen continuous production growth in recent months. In the NEV market, raw material prices generally declined in June, coupled with the impact of the mid-year period, producers generally conducted destocking to optimize cash flow, with terminal vehicle sales performing mediocrely. The consumer market also remained mediocre, with some sectors experiencing periodic declines. Meanwhile, downstream battery cell manufacturers significantly drove down prices, severely limiting the profit margins of cathode materials. Looking ahead to July, the market may experience periodic recovery, but the recovery will be limited. It is expected that ternary cathode material production will increase by 1.31% MoM.

Iron phosphate

In June, the domestic iron phosphate market showed a steady increase, with production slightly increasing by 2% MoM and significantly increasing by 56% YoY. On the supply side, enterprises maintained a stable production pace. Although a few enterprises conducted maintenance, it did not significantly impact overall production, with limited monthly increases. On the demand side, downstream LFP enterprises saw an increase in orders, directly boosting the sales growth of upstream iron phosphate enterprises. Additionally, enterprises rushed to meet mid-year sales targets and prepared for business negotiations in H2, enhancing market activity. In terms of costs, the prices of industrial-grade MAP and phosphoric acid remained stable in June. Although the price of ferrous sulphate increased, the overall cost fluctuation was relatively small. Due to the lack of cost support, iron phosphate prices continued to weaken, with some enterprises more actively reducing prices to ensure shipments. In July, with the resumption of production by enterprises undergoing maintenance and the gradual release of capacity, iron phosphate production is expected to achieve a slight increase. It is expected that production will increase by 4% MoM and 61% YoY in July.

LFP

In June, China's LFP material production increased by approximately 1.56% MoM. The operating rates of leading material producers significantly improved this month, but production at some small and medium-sized material producers slightly declined due to the impact of downstream battery cell manufacturers' demand. From the perspective of different application fields, some material plants were affected by the active destocking efforts of downstream passenger vehicle OEMs this month, leading to a slowdown in demand for power battery cells. This, in turn, led to a slight production cut in cathode materials for NEVs at the material plant level. Demand in the ESS sector remained strong, driven by ongoing rush to export activities at battery cell manufacturers and increased demand for ESS due to supportive policies in Europe and Australia. Combining both NEV and ESS sectors, LFP material production showed an overall upward trend. Looking ahead to July, the NEV market is expected to remain weak, but it is worth noting that the demand for battery cells corresponding to some popular car models is undersupply, which stands in stark contrast to the demand expectations for other car models. The ESS market is expected to remain strong in July, driving overall industry growth.

Lithium Cobaltate (LCO)

In June 2025, LCO production decreased by 3% MoM and increased by 20% YoY. On the demand side, the 3C electronics consumer market was weaker than before, and the price trend of LCO was highly uncertain. Downstream battery cell manufacturers were more sensitive to raw material costs, and with sufficient inventory on hand, this exerted a certain degree of pressure on market demand. On the supply side, LCO cathode plants adopted a sales-based production strategy and did not maintain excessive inventory, resulting in a slight downward adjustment in production compared to the expected production schedule. In July, downstream demand is expected to remain weak overall, coupled with a shortage of raw materials. Enterprises will adopt a more conservative production schedule. It is expected that LCO enterprises will continue to adhere to a sales-based production strategy in July, with production remaining basically flat compared to June.

SMM New Energy Research Team

Cong Wang 021-51666838

Rui Ma 021-51595780

Yanlin Lv 021-20707875

Disheng Feng 021-51666714