SMM Analysis of China December Lithium Hydroxide Production and January Forecast

According to SMM, China's lithium hydroxide production in December 2024 saw a significant MoM decline of approximately 22%, while increasing 15% YoY.

Supply side, from the perspective of raw material types, smelting output decreased by about 23% MoM, up 20% YoY. On one hand, over the past two months, due to a high proportion of long-term contracts in the market, spot order demand for lithium hydroxide has been limited. Although lithium chemical producers have maintained a firm stance on quotes, price increases have been slow. Coupled with raw material prices remaining high due to mines standing firm on quotes, the smelting cost losses have not significantly improved, prompting some lithium chemical plants to reduce production to focus solely on long-term contract supply. On the other hand, due to weak downstream demand, some major lithium chemical plants have reduced orders under tolling agreements. Combined with maintenance activities at lithium chemical plants since December, smelting output has shown a significant MoM decline.

Causticisation output remained flat MoM, as orders under tolling agreements showed no significant changes and new production lines ramped up slower than expected, keeping overall supply stable.

Demand side, ternary cathode material production in December decreased by approximately 7% MoM. With the continued decline in 5-series production, the share of 8-series increased to 40%. Overall performance, driven by end-user rush for installations, was better than the same period in previous years.

Export side, according to customs data, China's lithium hydroxide exports in November reached 5,494 mt, down about 30% MoM and 64% YoY. Exports to South Korea and Japan were 3,609 mt and 1,615 mt, accounting for 66% and 29% of China's total exports, respectively. These figures represent MoM declines of 37.4% and 4.8%, and YoY declines of 70% and 36%, marking the lowest levels in nearly three years. Overseas end-user sales in recent months have fallen short of expectations, coupled with inventory buildup, leading to a continued decline in export volumes.

In summary, with supply-side reductions significantly outpacing demand-side reductions in December, there was a notable destocking trend during the month. Looking at the production schedule for January 2025, most lithium chemical plants are expected to undergo maintenance, leading to a continued weakening of market supply. January production is expected to decrease by more than 10% MoM and over 5% YoY, with the destocking trend persisting throughout the month.