[SMM Analysis] Lithium Battery Entire Industry Chain Enters Peak Season in September, End-Use Demand Expected to Continue Increasing

SMM October 10 News:

Lithium Carbonate

In September 2025, China's total monthly lithium carbonate production continued to hit new highs, increasing 2% MoM and surging 52% YoY. The primary driver for the sustained production growth remained spodumene-derived lithium carbonate, with toll processing orders for non-integrated lithium chemical plants in full swing. Meanwhile, driven by continuously improving downstream demand, the overall industry supply capacity also increased accordingly. By raw material, spodumene, salt lake, and scrap-derived lithium carbonate all saw certain increments, while lepidolite-derived lithium carbonate continued to pull back.

Spodumene-derived lithium carbonate: Total production in September increased 5% MoM. On one hand, strong downstream demand stimulated some flexible production lines to switch to lithium carbonate production, contributing to the increase. Production at some other lithium chemical plants also improved due to demand. On the other hand, non-integrated lithium chemical plants maintained high operating rates, stimulated by futures hedging profits, further driving production growth.

Lepidolite-derived lithium carbonate: Total production decreased 15% MoM. Previously, a leading lepidolite mine in Jiangxi province suspended production due to mining permit issues, and its related lithium chemical plant maintained minimal production in August using ore inventory and spot orders. As ore inventory was gradually depleted, coupled with limited circulation of domestic lepidolite ore, output continued to decline. Production at other lepidolite-derived lithium chemical enterprises remained relatively stable. Salt lake-derived lithium carbonate: Total production increased 10% MoM. Output increased significantly due to ramp-up of new production lines, while other enterprises maintained stable production under favorable weather conditions.

Scrap-derived lithium carbonate: Total production in September increased 7% MoM, mainly benefiting from the continuously favorable lithium carbonate demand market, which boosted production enthusiasm among recycling enterprises, though the overall production scale remains limited.

Currently, the lithium carbonate market still faces uncertainty regarding mining policies in Jiangxi province. From a pessimistic perspective, if related mines face suspension, minimal production could be temporarily maintained using inventory. Furthermore, new production lines are coming online for both spodumene-derived and salt lake-derived lithium carbonate, coinciding with the traditional peak season for downstream demand, leading to sustained positive market expectations. Total lithium carbonate production in October is expected to maintain growth potential, potentially exceeding the 90,000 mt mark. SMM will continue to closely monitor the specific implementation of mining policies in Jiangxi province.

Lithium Hydroxide

According to SMM data, China's September lithium hydroxide production surged 26% MoM, driven primarily by two factors: On the smelting side, production resumptions at enterprises previously under maintenance, combined with flexible adjustments by individual companies based on order increases, led to a slight output increase. Additionally, the price spread between lithium hydroxide and lithium carbonate turning negative stimulated some enterprises to increase lithium hydroxide production on flexible lines, contributing partially to the overall output increase, collectively driving a 19% MoM production increase in the smelting sector. On the causticisation side, production resumptions at salt lake enterprises and good orders at individual companies jointly contributed to a significant production increase.

Looking ahead to October, a few new production lines on the smelting side are expected to continue ramping up slightly, while the production schedule for the causticisation process remains relatively stable. Overall output is projected to remain flat MoM, but down 12% YoY.

Cobalt Sulphate

In September 2025, SMM cobalt sulphate production increased 8.24% MoM and 17.6% YoY. By raw material source, cobalt intermediate products accounted for approximately 59%, MHP for about 18%, and recycled materials for around 23%. Due to the extension of the DRC ban, cobalt intermediate product prices continued to rise, leading smelters to gradually reduce their inventories of cobalt intermediate raw materials. Recycled materials and MHP continued to substitute for cobalt intermediate products. However, MHP and recycled raw materials have also become relatively tight recently, with their price coefficients rising steadily, reducing enterprises' willingness to procure these materials for production, thus weakening the substitution effect. Supply side, cobalt sulphate producers showed divergence. Small and medium-sized enterprises faced tight raw material inventories and maintained low operating rates. Large integrated enterprises had relatively sufficient raw material inventories, and with a seasonal improvement in downstream orders, their production saw some increase. Demand side, orders from both ternary and Co3O4 enterprises improved in September. Some enterprises with low raw material inventories continued purchasing in the market. Coupled with the latest policy announcement from the DRC on September 21, market concerns about future cobalt resource tightness grew, further strengthening downstream stocking sentiment. Looking ahead to October, cobalt sulphate prices are expected to rise, with profits continuing to recover. Production from small and medium-sized enterprises is likely to be maintained, while integrated cobalt sulphate producers with ternary and Co3O4 operations, due to persistently favorable orders, may see a slight increase in output. Cobalt sulphate production schedules for October are forecast to increase 3.60% MoM.

Co3O4

In September 2025, Co3O4 production increased significantly, up 9% MoM and 40% YoY. The main driver for the production increase was higher production schedules from LCO cathode material enterprises and downstream battery cell manufacturers actively raising their capacity utilization rates to meet consumer electronics peak season demand, thereby expanding their procurement scale for Co3O4. Looking ahead to October, against the backdrop of further expanding end-user stocking demand, Co3O4 production is expected to maintain its growth trend, with a projected MoM increase of around 2%. This trend indicates that the cobalt-based materials market maintains high activity levels, supported by the traditional peak season for consumer electronics.

Ternary Cathode Precursor

In September 2025, domestic ternary cathode precursor production continued its substantial growth trend, increasing 12.28% MoM and 22.05% YoY. By product series structure, the share of 6-series products further expanded, reaching 45.66%. Driven by robust demand in the domestic EV market in recent months, the share of 6-series materials has remained high. In contrast, the market shares of other series precursors have been somewhat squeezed, with the 5-series accounting for 14.20%, the 8-series for 26.91%, and the 9-series for 10.71%. Currently, the domestic EV market is still in the traditional peak season, with sales of some car models performing well; additionally, as some policy subsidies are expected to phase out next year, demand in Q4 of this year is still expected to remain at a relatively good level. On the consumer market side, recent demand has been generally stable, and it is anticipated that October will see some growth due to stockpiling for the "Double 11" shopping festival. Overall, market demand in October is expected to remain high, but affected by the recent sharp rise in raw material prices such as nickel and cobalt, precursor producers will place greater emphasis on cost-effectiveness when taking orders. At the same time, raw material supply is in a tight phase, and in Q4, some small producers may see actual output fall short of demand due to insufficient raw materials. It is currently projected that ternary cathode precursor production in October will increase slightly by 2.8% MoM and 16.2% YoY.

Ternary Cathode Material

In September 2025, domestic ternary cathode material production continued to show significant growth, up 13.55% MoM and 23.44% YoY. In terms of product series structure, the share of 6-series products further expanded, reaching 45.15%. Driven by robust demand in the domestic EV market in recent months, the share of 6-series materials has remained high. In contrast, the market shares of other series precursors have been somewhat squeezed, with the 5-series accounting for 14.38%, the 8-series for 27.39%, and the 9-series for 10.59%. Currently, the domestic EV market is still in the traditional peak season, with sales of some car models performing well; additionally, as some policy subsidies are expected to phase out next year, demand in Q4 of this year is still expected to remain at a relatively good level. On the consumer market side, recent demand has been generally stable, and it is anticipated that October will see some growth due to stockpiling for the "Double 11" shopping festival. Overall, market demand in October is expected to remain high, but affected by the recent sharp rise in raw material prices such as nickel and cobalt, precursor producers will place greater emphasis on cost-effectiveness when taking orders. At the same time, raw material supply is in a tight phase, and in Q4, some small producers may see actual output fall short of demand due to insufficient raw materials. It is currently projected that ternary cathode precursor production in October will increase slightly by 1.65% MoM and 16.2% YoY.

Iron Phosphate

In September, domestic iron phosphate production surged 17% MoM and 58% YoY. Iron phosphate supply in September saw a very significant increase compared to August, with monthly production exceeding 300,000 mt. Integrated leading LFP enterprises experienced a surge in orders, driving up demand for self-produced iron phosphate. Meanwhile, the lithium battery market entered its peak season in September, with downstream orders being transmitted through the chain. LFP enterprises saw significant increases in orders and corresponding production schedules, and the market for externally purchased iron phosphate was relatively active. This led to a breakthrough in both self-produced and externally sold iron phosphate in September. Concurrently, some iron phosphate enterprises also resumed operation of previously idle production lines to cope with the order growth. Cost side, industrial-grade MAP prices remained low in September, while ferrous sulphate prices continued to rise due to supply impacts, keeping iron phosphate enterprises under heavy pressure regarding iron sources. With changes in the supply-demand relationship in September, iron phosphate prices are expected to see a slight increase in October. Iron phosphate production in October is projected to increase by 6% MoM and 58% YoY.

LFP

In September, China's LFP material production increased by approximately 12.8% MoM and 42% YoY, with an industry operating rate of about 68%. Supply side, LFP enterprises showed high production enthusiasm this month. Downstream demand was robust overall, with production increases across material plants. Both the power and ESS sectors had substantial orders, and some top-tier enterprises operated at full or even overload capacity. Some companies continued to add new capacity, particularly as downstream battery cell manufacturers' demand for high-tap-density materials kept increasing, prompting material plants to accelerate the expansion of new production lines. Demand side, downstream battery cell manufacturers experienced strong overall demand this month. Top-tier cell manufacturers saw significant demand increases driven by the battery swapping network for pure electric heavy-duty trucks, coupled with the boost from the traditional auto sales peak season, "September-October peak season." Demand from second and third-tier cell manufacturers also improved. Additionally, the ESS sector performed excellently this month; according to the latest survey, no ESS battery cell manufacturers have shown a trend of reducing volume, indicating high industry prosperity. Looking ahead to October, power battery cell demand is still expected to benefit from continued growth driven by the "September-October peak season," and the ESS market will maintain a high level. The industry overall is expected to maintain a high growth momentum, with an anticipated growth rate of over 5%.

LCO

In September 2025, the LCO market showed steady growth, with a slight production increase for the month—up 3% MoM and significantly up 55% YoY. This growth was mainly driven by sustained demand from the end-use consumer electronics sector and active stockpiling by downstream players in preparation for the traditional peak season. Considering the growing expectation among end-users for tighter raw material supply in 2026, LCO production in October is expected to continue its upward trend, with a projected MoM increase of about 2%. Currently, orders from downstream battery enterprises are robust, and the overall industry operating rate remains high, reflecting optimistic demand expectations across the industry chain.

SMM New Energy Research Team

Wang Cong 021-51666838

Ma Rui 021-51595780

Lyu Yanlin 021-20707875

Feng Disheng 021-51666714