[SMM Analysis] Rising Cost Pressures May Curb March NCM Demand Recovery

In the first week following the Chinese New Year holiday, ternary cathode material prices saw a sharp increase. From the raw material cost perspective, nickel sulfate and manganese sulfate prices rebounded slightly, while cobalt sulfate remained temporarily stable. The primary driver of the price hike came from lithium salts: volatility intensified due to changes in U.S. tariff policies combined with adjustments in Zimbabwe's lithium ore export regulations. This led to a significant rise in lithium carbonate futures prices, which in turn pushed spot lithium carbonate prices notably higher. Lithium hydroxide prices followed suit with substantial increases, driving a rapid recovery in ternary material prices.

Regarding payable levels, long-term contract payables remained largely unchanged overall. Due to expectations of further price increases for nickel sulfate and cobalt sulfate, there is potential for nickel and cobalt payables to rise, though this has not yet been transmitted to the cathode material segment. As demand gradually recovers and supply tightens in March, payables are expected to have further room for increase. For lithium, since payables were already at relatively high levels before the holiday, the scope for subsequent adjustments remains limited.

In the spot market, some battery manufacturers had already locked in portions of forward orders before the holiday based on expectations of continued raw material price increases in the coming months, resulting in relatively low spot market transaction volumes this week. Additionally, with operations just resuming after the holiday and lithium salt prices rising rapidly, market sentiment remained largely wait-and-see. However, a small number of battery manufacturers, anticipating further price increases, chose to sign certain orders this week.

Looking ahead, nickel, cobalt, and lithium raw material prices are all expected to have further upside potential in March, subjecting ternary cathode material manufacturers to greater cost pressures. This will, to some extent, restrain demand recovery in both the e-mobility and consumer electronics segments of the ternary market in March. Regarding the EV market, NEV sales have declined noticeably in early 2026 due to subsidy policy adjustments. This week, some leading ternary cathode manufacturers have already lowered their March production expectations. Although March traditionally marks a demand recovery period and represents the final deadline for "export rush" orders ahead of policy changes, leading to a significant MoM increase compared to February, the magnitude of this recovery is expected to be more limited than pre-holiday forecasts suggested.