China's cathode material profit narrows during the CNY holiday

The current market:
On the eve of the Chinese New Year in 2025, the ternary cathode market was stuck in a stalemate of "low transactions and high costs". On the one hand, the payables for MHP remained at a high level due to the uncertainty of Indonesia's nickel ore quota policy, leading to an increase in nickel salt costs. Meanwhile, the supply of upstream raw materials for lithium salts was stable, and the overall price of lithium salts didn't fluctuate significantly. However, the production cost of ternary cathode materials was higher; On the other hand, downstream battery factories had a low purchasing willingness due to inventory accumulation and weak orders. Enterprises outsourcing raw materials suffered significant losses, and as a result, many ternary cathode companies mainly focused on laying out medium and high nickel to avoid the tug-of-war with low-end models.

Macro news:

During the Chinese New Year holiday, the US pre-imposed tariffs on China, Canada and Mexico had a greater impact on the market sentiment and future expectations. Before the Chinese New Year, market players were expected to see an increase of the overseas ternary cathode materials, while they showed concerns about the development of  EVs in Europe and the United States in 2025 after the holiday. As a result, most market players reduced the EV production and sales expectations.

Corporate perspective:
The cost of raw material nickel sulfate has increased, and the prices of cobalt sulfate has temporarily stabilized after experiencing the production reduction and recovery. The prices of lithium chemicals may fluctuate narrowly in the short term, and the overall cost of high nickel ternary cathode materials may have a slight increase. Although the demand for ternary cathode materials in January and February has slightly increased year-on-year, manufacturers still adopt inventory control as their current strategy and purchase according to actual needs amid the weak demand.

The future market forecast:
The demand for the ternary cathode materials after the holiday weakened, but the increase in costs led to the expansion of producers' losses. Under the low inventory of finished products, there is still price support for the current ternary cathode materials. Most long-term enterprises for raw materials have suspended the small orders for the procurement, and some enterprises have reduced MHP purchases and supplemented nickel sulfate in small quantities. At the same time, the prices of ternary cathodes for battery factories have slightly increased, and it is expected that the overall prices of ternary cathodes will be firm in February.