[SMM Analysis] Lithium Carbonate supply and demand growth rate appears "Fault" irrational production to increase Industry inventory pressure

SMM, 31 March:

Source: SMM

On the supply side, with the gradual control of the domestic epidemic situation in March, the resumption of work in various places has been carried out smoothly, and the supply side of lithium carbonate has increased significantly in March. Prior to the relatively serious epidemic in Jiangxi Province, the operating rate quickly recovered, Qinghai area as the weather warmer, some enterprises operating rate has also been raised. According to SMM, major smelters in Sichuan and Qinghai arranged maintenance plans in mid-and early April, ranging from one week to half a month. At present, there is no obvious improvement in terminal demand, and the full production power of the enterprise is insufficient, but 1) some spodumene smelters are still completing production tasks under the condition of few orders; 2) compared with pyroxene enterprises, mica and brine raw materials currently have a certain cost advantage, and the operating rate continues to remain high. At present, there is no plan to lower the operating rate of lithium salt enterprises in April. In terms of current production, SMM expects China's lithium carbonate production to be 15000 tons in April, up 12.7 per cent from a month earlier and 26.5 per cent from a year earlier.

On the demand side, market demand appeared an obvious inflection point with the spread of the overseas epidemic in mid-March. On the consumer battery side, a number of terminal factories in Southeast Asia announced the suspension of production in mid-late March, while a large number of export orders were cancelled, affecting upstream lithium manganate, lithium cobalt acid and digital ternary orders, and the operating rate was controlled from mid-to late March. In the aspect of power battery, the operating rate of the whole car factory and battery enterprises continues to recover, but because the terminal consumption has not improved all the time, the battery enterprises began to postpone or cancel the material order in the middle and late March, choosing to digest the material inventory first. Multiple factors led to sporadic battery-grade lithium carbonate orders and a decline in industrial-grade lithium carbonate orders in March. According to the industry to SMM, the current operating rate of power battery companies remains low, and ternary demand is temporarily shut down in April; lithium iron phosphate storage demand may increase, and lithium carbonate demand is expected to increase slightly to 9800 tons in April.

SMM predicts that if lithium salt companies still have no plans to cut production, the cumulative pressure on the industry will increase significantly in April. Since 2018, China has accumulated stocks of more than 50,000 tons of lithium carbonate (including the portion used for causticization to lithium hydroxide). SMM believes that irrational production behavior maintenance time is limited, in the cost support, price decline space is limited, the industry may enter the active production reduction phase in the second quarter.

SMM Battery Materials Research team

Hu Yan 021-51666809

Qin Jingjing 021-51666828

Mei Wangqin 021-51666759

Huo Yuan 021-51666898

Wuyang 021-51666818

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