[SMM Analysis] Cathode material production increased MoM in July, with stockpiling for the peak season at terminals approaching

SMM News on August 1:

Lithium Carbonate

In July 2025, the total monthly production of lithium carbonate in China exceeded 80,000 mt for the first time, with a 4% MoM increase and a substantial 26% YoY growth. The main driver of this production growth was the emergence of hedging opportunities in the futures market, prompting lithium chemical plants with previously low operating rates to gradually resume production, significantly boosting the industry's overall supply capacity. By raw material type: Spodumene saw significant growth, while lepidolite and salt lake-derived lithium carbonate dropped back slightly Lithium carbonate derived from spodumene: Total production in July increased by 14% MoM. On the one hand, production lines at some first- and second-tier lithium chemical plants resumed operations, contributing to the growth. On the other hand, non-integrated lithium chemical plants increased their operating rates driven by profits from futures hedging, pushing production higher. Lithium carbonate derived from lepidolite: Total production decreased by 8% MoM. Although market concerns arose due to mining license issues at mines in Jiangxi, these mines are currently maintaining normal production. A leading lithium chemical plant's production in July did not reach previous highs due to production line maintenance, leading to a certain decline in overall lepidolite-derived lithium carbonate production. Lithium carbonate derived from salt lake: Total production decreased by 2% MoM, mainly due to production cuts and suspensions at some salt lake enterprises caused by mining issues, while the remaining enterprises maintained stable production under favorable weather conditions. Lithium carbonate from recycling: Total production in July increased by 10% MoM, primarily benefiting from the rise in lithium carbonate prices, which boosted recycling enterprises' production enthusiasm. However, the total production volume remains relatively weak. August Outlook: Uncertainty persists in Jiangxi mines, but overall production may continue to grow The lithium carbonate market in August still faces uncertainties regarding mining policies in Jiangxi. If extreme situations occur (such as mine shutdowns), relevant lithium chemical plants can still rely on inventories and spot order purchases to maintain a small amount of production. Additionally, supported by hedging profits and the expectation of some flexible production lines continuing to ramp up, the total production of lithium carbonate in August is expected to have growth potential. Subsequent attention should be paid to the specific implementation of mining policies in Jiangxi.

Lithium Hydroxide

SMM data shows that domestic lithium hydroxide production in July increased slightly MoM but decreased by 22% YoY. In the smelting sector, orders for ternary cathode material were slightly better than expected, with downstream and end-user cargo pick-up increasing slightly. Some manufacturers produced based on sales, leading to an increase in output. Coupled with new production capacity in the ramp-up stage, smelting sector production increased by 2% MoM. In the causticisation sector, due to a slight recovery in orders at some enterprises, output increased by 8% MoM. Looking ahead to August, due to limited market expectations for growth, some lithium chemical plants plan to switch flexible production lines to lithium carbonate production, expecting a slight pullback in smelting sector production. Meanwhile, due to planned production suspensions at some causticisation enterprises, causticisation sector production will also decrease. Overall, the total production of lithium hydroxide in August is expected to decrease by 5% MoM and 24% YoY.

Cobalt Sulphate

In July 2025, SMM's cobalt sulphate production decreased by 9.56% MoM and increased by 1.01% YoY. In terms of raw material sources for production, cobalt intermediate products accounted for approximately 53%, MHP accounted for approximately 18%, and recycled materials accounted for approximately 29%. Due to the extension of the DRC ban, the prices of cobalt intermediate products continued to rise, and the inventories of cobalt intermediate product raw materials at smelters gradually decreased. Currently, recycled materials and MHP are gradually squeezing out cobalt intermediate products. In terms of supply, the spot price of cobalt sulphate in July generally showed a continuous upward trend. However, due to the larger increase in cobalt intermediate products, the production cost of cobalt sulphate further inverted. Some cobalt sulphate smelters still chose to reduce cobalt sulphate production and switch to producing other cobalt products with better economic viability due to weak production economics or shortages of raw material inventories. In terms of demand, July was still in the off-season for consumption, and orders from downstream ternary cathode precursor and Co3O4 enterprises did not show significant improvement. They temporarily chose to wait and see the market, mainly digesting previous inventories. A few enterprises with relatively short days of raw material inventories mainly made just-in-time procurement, and demand was relatively stable. It is expected that by August, the issue of tight raw material supply for cobalt intermediate products will become more prominent. Smelters' production schedules will tend to be cautious. Individual enterprises with relatively limited inventories will continue to choose to reduce cobalt sulphate production or even suspend production. It is expected that cobalt sulphate production schedules in August will decrease by 3.57% MoM.

Co3O4

In July 2025, Co3O4 production slightly pulled back by 2% MoM but still achieved a significant growth of 25% YoY. On the supply side, producers are facing pressure from tightening raw material supplies, leading some factories to gradually take measures such as production suspension or production cuts, resulting in a decrease in the self-production ratio. To cope with price fluctuations and raw material shortages, enterprises have increased the proportion of toll processing, which has now exceeded 50%. On the demand side, the growth in demand from downstream application fields has driven the procurement of Co3O4. Looking ahead to August, it is expected that the tight supply situation of raw materials will further intensify. Against this backdrop, the proportion of toll processing and long-term agreement orders for Co3O4 enterprises will continue to increase, while the demand space in the spot market (spot orders) will continue to be squeezed. Due to raw material shortages and adjustments in production modes, the overall production schedules of Co3O4 enterprises are expected to become tighter. Based on a comprehensive assessment, the overall market supply in August may continue the downward trend, with the expected MoM decline expanding to around 7%.

Ternary Cathode Precursor

In July 2025, SMM's ternary cathode precursor production showed a steady growth trend, increasing by 5.71% MoM and 5.52% YoY. From the product series structure perspective, the market landscape remained stable, with 5-series precursors accounting for 15.65%, 6-series products maintaining dominance at 42.89%, while 8-series and 9-series held market shares of 27.39% and 9.96%, respectively. In the power battery application sector, 6-series products continued to be the mainstream choice in the domestic NEV market, while overseas NEV markets were still dominated by high-nickel products. Notably, recent demand for 9-series products showed an upward trend, slightly squeezing the market share of 8-series materials. In the consumer electronics market, with increasing attention to high-nickel products, the market share of 5-series materials experienced a slight decline. Currently, ternary cathode precursor production showed robust growth, driven by three main factors: First, after manufacturers' concentrated destocking in June due to the mid-year period, the industry entered a phased restocking cycle in July. Second, to prepare for the traditional "September-October peak season" in auto sales, precursor producers initiated early stockpiling. Third, market expectations of rising nickel sulphate and cobalt sulphate prices prompted some downstream cathode material producers to adopt advance procurement strategies, creating a front-load orders effect. Looking ahead to August, although the traditional peak season is approaching, as some front-loaded orders were already fulfilled in July, production growth is expected to slow down, with an estimated MoM increase of 5.4%.

Ternary cathode material

In July 2025, SMM ternary cathode material production continued its upward trend, rising 5.75% MoM and surging 16.65% YoY. The overall industry operating rate rebounded to 45%, slightly higher than June. By product structure, 5-series materials accounted for 15.05%, while 6-series materials maintained leadership with 36.61%, and 8-series and 9-series held market shares of 29.06% and 17.37%, respectively. As the mainstream product in the domestic power battery market, 6-series materials saw further market share expansion, while overseas markets remained dominated by high-nickel products, with notably growing demand for 9-series products, partially replacing 8-series materials. In the power battery market, ternary material orders concentrated toward leading producers. With the approaching "September-October peak season" for traditional auto sales, cathode material suppliers have begun stockpiling. In the consumer electronics market, anticipating raw material price increases, some battery cell manufacturers adopted advance procurement strategies, with this front-load orders effect effectively boosting cathode material demand. Additionally, the demand gap created by some cell manufacturers exiting the market due to the recent power bank recall incident prompted other producers to accelerate market expansion, further stimulating order growth. For August, as some front-loaded orders were already fulfilled in July, ternary material production growth is expected to moderate, with an estimated MoM increase of 3.07%.

Iron Phosphate

In July, domestic iron phosphate production increased by 10% MoM and surged by 70% YoY. On the supply side, iron phosphate production by integrated enterprises increased significantly in July: on the one hand, the production of corresponding supporting iron phosphate by integrated enterprises increased significantly; on the other hand, the expansion of production capacity by some enterprises drove up production. However, the concentrated release of new production capacity also squeezed the shipments of existing iron phosphate enterprises, leading to some enterprises' shipments falling short of expectations. On the demand side, downstream demand for LFP increased significantly in July. Enterprises were more inclined to purchase high-cost-performance iron phosphate with lower prices and excellent quality. The market's price expectations for iron phosphate weakened, but the requirements for product quality continued to rise. On the cost side, industrial-grade MAP was in the off-season in July, and prices pulled back significantly compared to June; ferrous sulphate prices continued to rise, leading to a significant increase in the iron source cost pressure for iron phosphate enterprises. With the continuous release of new production capacity in August, iron phosphate production is expected to continue to grow, with an estimated increase of 3% MoM and 56% YoY.

LFP

In July, China's LFP material production increased by approximately 1.86% MoM and 36% YoY, with an industry operating rate of approximately 58%. This month was the traditional off-season for auto sales, and the overall demand from downstream battery cell manufacturers was relatively weak. The overall operating rate of leading material manufacturers was relatively stable this month, but a small number of second- and third-tier material manufacturers experienced production reductions, mainly due to adjustments in product prices and downstream demand. From the perspective of application fields, there were signs of a decrease in power orders for material manufacturers this month. On the one hand, it was due to the upgrade and transformation of some production lines by a certain battery cell manufacturer, which affected normal production and led to a decrease in corresponding cathode material orders; on the other hand, it was due to the overall sluggish performance of the power vehicle sales in the industry, with August being the traditional off-season for auto sales, resulting in weak production of power battery cells in July. However, orders for ESS materials performed well. On the one hand, the US's decision to postpone the implementation of the reciprocal tariff increase by 90 days kept downstream battery cell manufacturers' US orders relatively hot; coupled with the implementation of supportive policies in overseas markets such as Eastern Europe, stimulating an increase in household ESS installations; on the other hand, domestic ESS projects continued to experience good demand growth driven by relevant policies of local governments, leading to a slight increase in LFP material production this month. Looking ahead to August, on the NEV market side, the downstream stockpiling rhythm for the "September-October peak season" will start early, and the ESS market will also maintain normal growth. The production lines of LFP cathode material manufacturers will also accelerate accordingly.

LCO

In July 2025, LCO production showed significant growth, increasing by 7% MoM and 30% YoY. On the demand side, the 3C electronic consumer market demand increased. Starting from September, various brands will enter the intensive new product launch season, coupled with the approaching traditional consumption peak season of "September-October peak season", downstream terminal manufacturers stockpiled for production. Additionally, the market generally holds a bullish outlook for the future price of LCO, prompting some enterprises to place orders in advance to build up inventory. On the supply side, LCO cathode material producers generally adopt a "produce based on sales" strategy, and have increased their operating rates in response to the increase in downstream procurement demand. Looking ahead to August, it is expected that downstream demand will remain stable and increase slightly. Against this backdrop, LCO producers may continue to adhere to the "produce based on sales" strategy, and it is expected that monthly output will achieve a 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