A Glance of China Lithium-ion Battery Materials Week 4 , Dec 2022

▼ Lithium compounds prices may keep dropping by the end of December

• Lower price expectations from key lithium compounds suppliers when production resumes to the normal level.
• Sluggish demand from both traders and downstream users (ternary cathode manufacturers and lithium iron phosphate cathode producers)

-- Nickel sulfate prices are expected to remain stable, with chances to trend down.

• Ample supply with new production capacity commenced.
• Nickel sulfate producers curb or postpone the production plan upon the weakened demand for ternary materials.
• Currently, traders take the initiative to lower prices.

▼ Cobalt sulfate prices may continue to fall.

• Ample global supply despite declining production in China
• Sluggish demand for ternary batteries used in 3C electronics
• Most smelters are fence-sitting, while partial smelters rush to sell to close their fiscal year with a healthy cash flow, causing fierce price competition.

-- Manganese sulfate prices may stay flat, with chances to slide.

• Manufacturers tend to curb production (by 40%-50%, partially), amid sufficient supply, dull demand, and low profits.
• Regarding the downstream demand, apart from ternary batteries, partial manufacturers are also paying attention to sodium-ion batteries, lithium iron phosphate (LFP) batteries, and lithium ferromanganese(LMFP) phosphate batteries.

▼ Ternary cathode materials prices are expected to dip a little.

• Most ternary cathode enterprises intend to cut production in December, with an overall expected reduction of 20%-30%MoM.
• Less demand from downstream cell producers at  year-end
• Partial ternary cathode producers are selling in-plant stocks of lithium compounds to keep a healthy cash flow.
• Partial ternary materials are on sale.
• Lithium carbonate prices are declining as well.

▼ Lithium iron phosphate (LFP) cathode materials prices may drop in the short term.

• Slower demand growth of the downstream markets.
• Bearish market sentiment and fewer trading activities when the CNY holiday is approaching.  
• Partial enterprises have started their new year holiday.

-- Battery separator prices may remain stable

• On the supply side, producers prioritize on-demand production based on term contracts, driving down prices with mass-produced dry-process battery separators.
• On the demand side, the demand growth from the downstream cell market is slowing down.

▼ Electrolyte prices may slip in the short term.

• Given the weakened demand, electrolyte enterprises produce on order, with partial small and medium-sized manufacturers reducing production.
• Fewer trading activities in the China electrolyte market.
• The prices of lithium compounds keep sliding, dragging lithium hexafluorophosphate (LiPF6) prices.

We mentioned in late November that the lithium compounds price was expected to trend down in mid-December and even in late November at the earliest. Mysteel Research & Consulting expects the lithium carbonate price to trend down till next February, around 400k-450k yuan/tonne, while lithium hydroxide's price elasticity is lower than lithium carbonate as term contracts are predominant in this market. On the one hand, the seasonality of lithium mining shows that Q1's lithium refining output is usually 20% lower than Q4. It is expected that the output of lithium carbonate in Q1 2023 will be reduced by 15%-20%, due to the maintenance routine. On the other hand, the output of downstream key battery plants is expected to drop by 10% MoM, according to the Mysteel survey. Correspondingly, the cathode materials plants (including both ternary cathode and LFP producers) also cut their production plans. According to the Mysteel survey, the lithium compounds in-plant inventory at cathode materials producers can last for about a month of operation. On-demand procurement from the cathode materials producers and increased trading/speculation activities of traders to close their fiscal year with a healthy cash flow both push down the lithium compounds prices. Mysteel Research & Consulting expects the new energy passenger vehicle sales to reach 1 million units next Q1, considering the 2022 year-end car assembly data, the impact of the upcoming CNY holiday, the nationwide Covid cases spread, and the withdrawal of NEV purchase subsidies.

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