[SMM Analysis] Cathode Material Output Rose MoM in August, September-October Peak Season Begins Warm-up

SMM September 1:

Lithium carbonate

In August 2025, China's monthly lithium carbonate production hit a new record, exceeding the 85,000 mt mark, up 5% MoM and surging 39% YoY. The sustained production growth was primarily driven by the spodumene segment, with toll processing orders for non-integrated lithium chemical plants in full swing. Meanwhile, robust downstream demand continued to boost the industry's overall supply capacity.

By raw material: Spodumene showed significant growth while lepidolite experienced a notable pullback. Spodumene-derived lithium carbonate: Total production rose 19% MoM. On one hand, strong downstream demand prompted some flexible production lines to shift to lithium carbonate output, contributing to the increase. On the other hand, non-integrated lithium chemical plants maintained high operating rates due to futures hedging profits, further driving production growth.

Lepidolite-derived lithium carbonate: Total production fell 24% MoM. A leading mine in Jiangxi suspended operations due to licensing issues, with its associated lithium chemical plant maintaining minimal output in August through ore inventory and spot orders. However, production saw a significant decline compared to previous high operating rates. Other lepidolite-based lithium chemical producers maintained relatively stable operations. Overall, output from the lepidolite segment dropped markedly due to impacts from the leading mine and its supporting lithium chemical plant.

Salt lake-derived lithium carbonate: Total production decreased 12% MoM, mainly affected by reduced operations at some salt lake enterprises due to extraction issues, while others maintained stable production under favorable weather conditions.

Recycled lithium carbonate: Total production increased 14% MoM, benefiting from rising lithium carbonate prices which boosted recyclers' operating enthusiasm, though overall output remained limited.

In September, the lithium carbonate market still faces policy uncertainties regarding Jiangxi mines. However, as the deadline for relevant reports has not yet passed, these mines can currently maintain normal production. Additionally, new production lines are expected to commence in both the spodumene and salt lake segments, coupled with seasonal peak demand from downstream sectors, sustaining positive market expectations. September's total lithium carbonate production is projected to maintain growth potential. SMM will continue to closely monitor the implementation of mining policies in Jiangxi.

Lithium hydroxide

SMM data shows China's lithium hydroxide production fell 13% MoM and 31% YoY in August. The decline stemmed from two factors: Smelting side—a major producer's mid-month maintenance reduced output by approximately 12% MoM; Causticisation side—while some enterprises achieved significant output increases due to robust mid-month orders, this couldn't offset planned maintenance losses at other plants, resulting in an overall notable decrease. Looking ahead to September, as lithium chemical plants that underwent maintenance earlier gradually resume production, coupled with some companies flexibly adjusting production schedules based on orders on hand, lithium hydroxide production is expected to increase by 12% MoM, but remain down 21% YoY.

Cobalt Sulphate

In August 2025, SMM cobalt sulphate production decreased by 1.56% MoM but increased by 6.26% YoY. By raw material, cobalt intermediate products accounted for approximately 55%, MHP for 18%, and recycled materials for 27%. Due to the extension of the DRC ban, cobalt intermediate product prices continued to rise, leading to a gradual reduction in smelters' inventory of cobalt intermediate raw materials, with recycled materials and MHP partially substituting for cobalt intermediates. However, recent significant increases in the coefficients for MHP and recycled materials have dampened companies' willingness to procure these materials for production, thereby weakening the substitution effect. Supply side, cobalt sulphate production costs remained inverted in August, prompting some smelters to further reduce output or switch to more economically viable cobalt products such as cobalt chloride and Co3O4 due to weak production economics or raw material shortages. After several months of adjustments, cobalt sulphate producers' production plans have stabilized, with limited further downside room. Demand side, downstream buyers began stockpiling for the peak season in August, with improved orders for ternary and Co3O4 products, prompting some companies with low raw material inventories to initiate market purchases. By September, small and medium-sized cobalt sulphate producers are expected to have limited room for further output reductions, while integrated producers with ternary and Co3O4 capabilities may see slight production increases due to improved downstream demand, with September production schedules projected to rise by 2.67% MoM.

Co3O4

In August 2025, Co3O4 production increased by 13% MoM and 38% YoY. This growth was primarily driven by higher production schedules at LCO cathode manufacturers, as battery cell manufacturers actively raised capacity utilization rates to meet consumer electronics peak season demand, boosting procurement for Co3O4. In September, with resilient end-use demand, Co3O4 output is expected to maintain growth, with a projected MoM increase of around 5%, though actual production may be influenced by cobalt salt price fluctuations and company inventory strategies.

Ternary Cathode Precursor

In August 2025, domestic ternary cathode precursor production showed significant growth, up 8.55% MoM and 11.30% YoY. By product series, the 6-series maintained its dominant position in the domestic market, accounting for 42.43%. Driven by the traditional September-October peak season demand in the NEV market, the share of 6-series materials has remained high in recent months. The 5-series materials accounted for 15.06%, remaining basically stable. High-nickel products saw a slight increase this month, with the 8-series and 9-series accounting for 28.17% and 11.07%, respectively. Demand side, August was mainly boosted by stockpiling for the traditional peak season, with most producers reporting increased orders, though the growth remained concentrated in the NEV market. The consumer market showed overall solid demand, but growth was relatively limited. Currently, nickel and cobalt raw material prices are at high levels, and downstream cathode material manufacturers have limited acceptance of price hikes, leading precursor producers to face significant cost pressure and adopt a cautious approach to order-taking. Actual order volumes may fall short of market demand. Looking ahead to September, demand is expected to remain at August levels. However, due to potential tight raw material supply and continued price rises, some producers may rely on inventory consumption to meet orders, and the growth rate of production schedules is expected to narrow. On the other hand, demand in September is likely to receive some support from pre-holiday stockpiling for the National Day holiday. Overall, production in September is projected to increase by 3.89% MoM and 12.93% YoY.

Ternary cathode material

In August 2025, domestic ternary cathode material production rose by 6.99% MoM but still declined by 5.07% YoY. The overall industry operating rate continued to rebound, reaching 48%. In terms of product structure, the 5-series accounted for 15.63%, remaining basically stable, while the 6-series accounted for 37.49%, further increasing due to demand from the domestic NEV market during the September-October peak season, squeezing out some market share of high-nickel products. The share of high-nickel products dipped slightly, with the 8-series and 9-series accounting for 28.94% and 15.67%, respectively. In the NEV market, orders generally rebounded as producers prepared for the traditional peak season, but the larger increases were still concentrated among suppliers to leading battery cell manufacturers. In the consumer market, as July had already seen solid growth, end-use demand did not show significant improvement this month, and production performance was basically flat. Looking ahead to September, end-use demand is expected to maintain its current solid level. However, as producers' output grew rapidly in August, some September demand was already met through early stockpiling. Additionally, with nickel, cobalt, and lithium raw material costs at high levels and prices expected to continue rising, supply is anticipated to tighten. Some producers will comprehensively assess cost factors when taking downstream orders, and actual order volumes may fall short of demand. Overall, September production is projected to decline slightly by 1.51% MoM and 1.78% YoY.

Iron phosphate

In August, domestic iron phosphate production showed significant growth, up 5% MoM and 59% YoY, clearly indicating an expansion trend. The core drivers of growth were demand boost and capacity release: on one hand, LFP integrated enterprises had ample orders, directly boosting internal self-use iron phosphate production and serving as a key support for output growth; on the other hand, some iron phosphate producers actively scaled up output to match capacity expansion plans, further driving up total industry production. The fluctuation in lithium carbonate prices in August directly stimulated downstream LFP producers to accelerate their stockpiling pace, indirectly boosting the demand for iron phosphate. However, as the market share of integrated LFP enterprises continues to expand, the demand space for non-integrated iron phosphate has shown a shrinking trend. Against this backdrop, the industry's iron phosphate capacity remains on a continuous expansion path, while the overall market demand growth is relatively limited. The subtle changes in the supply-demand relationship force iron phosphate companies to adjust their pricing strategies or upgrade product competitiveness to secure downstream customer orders and maintain market share. On the cost side, in August, iron phosphate companies faced dual pressures of "relaxation and tightening": the industrial-grade MAP market entered the traditional off-season, with prices already showing a significant decline, providing some buffer for cost control; however, the continuous rise in ferrous sulphate prices led to a notable increase in cost pressure during the iron source procurement process, squeezing profit margins. Looking ahead to September, with the further release of downstream demand, the traditional peak season for the iron phosphate industry is approaching, and market confidence is gradually recovering. Most iron phosphate companies hold an optimistic outlook for the September market. In terms of production forecasts, it is expected that domestic iron phosphate production in September will continue to grow, with a MoM increase of about 4% and a YoY increase of up to 40%, indicating the industry is likely to maintain a good operating momentum.

LFP

In August, China's LFP material production increased by approximately 8.8% MoM and 50% YoY, with an industry operating rate of around 62%. LFP companies performed well overall this month, maintaining high levels of production enthusiasm. Particularly, top-tier material manufacturers experienced overcapacity production, with substantial orders in both power and ESS sectors. Demand from leading battery cell manufacturers showed differentiation, while second- and third-tier battery cell manufacturers saw generally positive demand, especially in the power sector, driven by the traditional peak auto sales season of "September-October peak season," which prompted active production and stockpiling, thereby increasing orders for material suppliers. The ESS sector also performed exceptionally well this month, with no signs of reduced output from any ESS battery cell manufacturer according to the latest survey, indicating high industry prosperity. Looking ahead to September, under the impetus of the "September-October peak season," the industry is expected to maintain a strong growth momentum, with a projected growth rate of over 5%.

LCO

In August 2025, LCO production showed a significant increase, up 19% MoM and 55% YoY. This was mainly due to the push from the traditional peak season for consumer electronics, with new models being released in Q3, coupled with summer sales promotions and back-to-school stockpiling, effectively stimulating downstream battery companies' purchase willingness for LCO cathodes. It is expected that with sustained momentum in end-use consumption, LCO production will continue its upward trend in September, with a projected MoM increase of up to 8%. Downstream order demand remains robust, and the overall industry operating rate maintains a high level.

SMM New Energy Research Team

Cong Wang 021-51666838

Rui Ma 021-51595780

Yanlin Lyu 021-20707875

Disheng Feng 021-51666714