China's nickel-cobalt-manganese (NCM) battery output fell for the third consecutive month in June, dropping to 20.5 gigawatt-hours (GWh), a decrease of 6.8% from May and 15.3% from March, according to data from the China Automotive Battery Innovation Alliance (CABIA).
The decline in NCM battery production aligns with market expectations, as some cathode producers reportedly cut their output by 20% to 40% in June due to weak downstream demand. This downturn has led to reduced spot liquidity for lithium hydroxide, with prices falling significantly in recent months.
Meanwhile, lithium iron phosphate (LFP) batteries continue to dominate the Chinese market, with output growing 5.4% month-on-month to 63.8 GWh in June. LFP batteries now hold a 75.5% market share, up from 73.1% in May, while NCM batteries' share dropped to 24.3% from 26.6%.
The weakness in China's domestic lithium hydroxide market has also affected overseas markets, contributing to price declines in the China, Japan, and Korea (CJK) market. Industry experts maintain a bearish outlook for the NCM sector in the coming months, with low operational rates expected to persist among NCM battery cathode producers.
Despite some recent restocking of lithium hydroxide by downstream Chinese NCM cathode producers, this is not anticipated to support hydroxide prices due to a lack of genuine demand. Market participants do not foresee a significant recovery in the NCM market in the near term, although the situation may potentially change in August.
