【SMM Analysis】Cathode Material Production Increased MoM in July, with Stockpiling for Terminal Peak Season Approaching

Lithium Carbonate

In July 2025, the total monthly domestic production of lithium carbonate exceeded 80,000 mt for the first time, with a 4% MoM increase and a significant 26% YoY increase. The main drivers of production growth were 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:

- Lithium carbonate derived from spodumene: Total production increased by 14% MoM in July. On the one hand, production lines at some first- and second-tier lithium chemical plants resumed operations, contributing to the increase. On the other hand, non-integrated lithium chemical plants increased their operating rates driven by profits from futures hedging, pushing production growth.

- Lithium carbonate derived from lepidolite: Total production decreased by 8% MoM. Mining license issues in Jiangxi Province raised market concerns, but the relevant mines are still maintaining normal production. A leading lithium chemical plant's production in July did not reach the previous peak due to production line maintenance, leading to a certain decline in overall lithium carbonate production from lepidolite.

- Lithium carbonate derived from salt lake: Total production decreased by 2% MoM, mainly due to production reductions and suspensions at some salt lake enterprises caused by mining issues, while other enterprises maintained stable production under favorable weather conditions.

- Lithium carbonate from recycling: Total production increased by 10% MoM in July, mainly benefiting from the rise in lithium carbonate prices, which boosted the production enthusiasm of recycling enterprises. However, the total production volume remains relatively weak.

August Outlook: Uncertainties in Jiangxi Mines Persist, but Overall Production May Continue to Increase

The lithium carbonate market in August still faces uncertainties regarding mining policies in Jiangxi Province. 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. In addition, supported by hedging profits and the expectation of increased production from some flexible production lines at the spodumene end, 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 Province.

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 terminal 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 incremental growth, some lithium chemical plants plan to switch flexible production lines to produce lithium carbonate, and smelting sector production is expected to decline slightly. 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 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, cobalt intermediate product prices continued to rise, and smelters' cobalt intermediate product raw material inventories 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 product prices, 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. Orders from downstream ternary and Co3O4 enterprises did not show significant improvement. They temporarily chose to wait and see in 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 cobalt intermediate product raw material supply will become more prominent. Smelters' production schedules will tend to be cautious. A few 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 dropped back slightly by 2% MoM but still achieved a significant growth of 25% YoY. On the supply side, producers are facing the pressure of tightening raw material supply, leading to some factories gradually taking measures to suspend or cut production, resulting in a decrease in the self-produced proportion. 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. Under this background, the proportion of toll processing and long-term agreement orders of Co3O4 enterprises will continue to increase, while the demand space in the spot market (spot orders) will continue to be squeezed. Due to the shortage of raw materials and adjustments in production modes, the overall production schedules of Co3O4 enterprises are expected to be tighter. Based on a comprehensive assessment, the overall market supply in August may continue the downward trend, with the expected MoM decrease expanding to around 7%. Ternary cathode precursor

In July 2025, the production of SMM's ternary cathode precursor showed a steady growth trend, up 5.71% MoM and 5.52% YoY. From the perspective of product series structure, the market landscape remained stable, with 5-series precursors accounting for 15.65%, 6-series products maintaining a dominant position with a 42.89% share, and 8-series and 9-series products occupying market shares of 27.39% and 9.96%, respectively. In the power battery application field, 6-series products continued to be the mainstream choice in the domestic NEV market, while overseas NEV markets remained dominated by high-nickel products. Notably, the demand for 9-series products has recently shown an upward trend, slightly squeezing the market share of 8-series materials. In the consumer electronics market, with increased attention to high-nickel products, the market share of 5-series products has slightly declined. Currently, the production growth of ternary cathode precursors is in good shape, with the main driving factors including: firstly, after producers destocked in June due to the semi-annual period, the industry entered a phased restocking cycle in July; secondly, to prepare for the traditional "September-October peak season" in the automotive market, precursor producers initiated early stockpiling; thirdly, the market's bullish expectations on the prices of nickel sulphate and cobalt sulphate prompted some downstream cathode material producers to adopt early procurement strategies, resulting in a front-load orders effect. Looking ahead to August, although the traditional peak season is approaching, due to the digestion of some front-load orders in July, the production growth rate is expected to slow down, with a MoM increase projected at 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 maintained dominance at 36.61%, with 8-series and 9-series capturing 29.06% and 17.37% market shares respectively. As the mainstream product in China's power battery market, 6-series materials saw further market share expansion, while overseas markets remained dominated by high-nickel products, with notable demand growth for 9-series materials partially substituting 8-series. In the power battery sector, ternary material orders concentrated among leading producers. With the approaching September-October peak season for auto sales, cathode material producers initiated stockpiling.

Consumer electronics market, anticipating raw material price hikes, prompted some battery cell manufacturers to adopt front-load procurement strategies, effectively boosting cathode material demand. Additionally, the exit of some cell manufacturers following power bank recalls created demand gaps, accelerating market expansion by remaining players and further stimulating order growth. For August, as some front-loaded orders were already fulfilled in July, ternary material production growth is expected to moderate to 3.07% MoM.

Iron Phosphate

Domestic iron phosphate production rose 10% MoM and surged 70% YoY in July. Supply side, output increased significantly: integrated producers saw notable growth in supporting iron phosphate output, while capacity expansions at some plants further lifted production. However, concentrated new capacity releases squeezed shipments at existing producers, causing some to underperform.

Demand side, downstream LFP demand grew markedly, with buyers favoring cost-effective, high-quality iron phosphate. Market expectations for iron phosphate prices weakened, but quality requirements intensified. Cost side, industrial-grade MAP prices pulled back noticeably from June amid off-season demand, while ferrous sulphate prices continued climbing, significantly raising iron source costs for producers.

With new capacities continuing to come online in August, iron phosphate output is projected to grow further, up 3% MoM and 56% YoY.

LFP

China's LFP cathode material production increased 1.86% MoM and 36% YoY in July, with industry operating rates around 58%. As a traditional off-season for auto sales, downstream cell manufacturers showed tepid overall demand. Leading material producers maintained relatively stable operating rates, while some second- and third-tier producers reduced output due to price and demand adjustments.

By application, power-related material orders showed signs of decline, attributed to production line upgrades at a cell manufacturer disrupting normal output and weak overall NEV sales. August's traditional auto sales slump further dampened July power cell production. Conversely, ESS material orders performed well, driven by the 90-day delay in US reciprocal tariff hikes sustaining strong orders, supportive policies in Eastern Europe boosting household ESS installations, and domestic ESS projects benefiting from local government initiatives.

For August, the NEV market's early September-October peak season stockpiling and steady ESS demand growth will prompt LFP cathode material producers to accelerate production lines.

Lithium Cobalt Oxide (LCO)

In July 2025, LCO production showed significant growth, up 7% MoM and 30% YoY. On the demand side, the 3C electronics consumer market experienced growth. Starting from September, various brands will enter an intensive period of new product launches. Coupled with the approaching traditional peak consumption season of "September-October peak season," downstream terminal producers stockpiled for production. Additionally, the market generally held a bullish outlook on subsequent LCO prices, prompting some enterprises to place orders in advance to build up inventory. On the supply side, LCO cathode material producers generally adopted a "produce based on sales" strategy, and correspondingly 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 monthly output is expected to achieve a slight MoM increase of approximately 1%.