Lithium Hydroxide: The supply surplus of lithium hydroxide intensified in June

Supply Side: In June, lithium hydroxide officially entered a surplus phase. Most smelters have seen a significant adjustment in their current inventory levels compared to the previous months. According to data, by the end of May, China's lithium hydroxide inventory was 34,400 mt, a MoM growth of 45%, with an increase of 10,600 mt compared to the end of April. Subsequently, some smelters may continue to face pressure to sell and may be forced to lower their production schedules. It is estimated that China's lithium hydroxide output in June will reach 35,500 mt, a MoM decline of 2%.

Demand Side: In June, the demand for lithium hydroxide is expected to maintain a downward trend. The stockpiling demand triggered by some end-users' mid-year targets has basically ended. Regarding the current NEV market demand, high-nickel ternary battery-powered NEV models are facing the impact of price cuts from NEV models powered by LFP battery in the domestic market, while overseas, consumption growth is also relatively weak. This has resulted in the cathode sector continuing to implement a destocking strategy, controlling purchases, slowing down cargo pick-up under long-term contracts, and reducing lithium hydroxide purchases in line with scheduled production.

From the perspective of supply, demand, and price performance, the supply of lithium hydroxide is expected to inch lower in June but will still be at a relatively high level historically. Downstream cathode material manufacturers are seeing a significant decline in their orders, and with the rapid decline in the prices of lithium hydroxide and the significant increase in customer-supplied lithium hydroxide from battery cell makers, the willingness to purchase lithium hydroxide may further shrink, and market demand will continue to decline. From an inventory perspective, after experiencing a significant surplus in April and May, the current lithium hydroxide inventory is at a high level for the past two years, further inhibiting the buying sentiment of downstream cathode material manufacturers. Although the price of spodumene provides some cost support for lithium hydroxide, market expectations of weaker demand for high-nickel cathode materials are gradually intensifying, thus the prices of lithium hydroxide are likely to maintain a downward trend.