China’s Lithium Hydroxide Production Declines in December, Expected to Drop Further in January

China reported a production of 20,330 metric tons (mt) of lithium hydroxide in December 2023, marking a 3% month-on-month (MoM) decrease and a 20% year-on-year (YoY) decline. This downturn is attributed to a combination of factors including weak market supply and demand, and the commissioning phase of new production lines which has led to sluggish growth in industry capacity.

A key factor influencing production has been the pricing dynamics, where lithium hydroxide prices fell below those of industrial-grade lithium carbonate, impacting profitability and thus, lowering operating rates. This situation is compounded by the completion of subcontracted orders, leading to a reduction in manufacturers’ scheduled production.

Despite a slight uplift in lithium hydroxide prices following the stabilization of lithium carbonate prices in late December, the market is still grappling with high inventories and order uncertainties. This has led cathode producers to adopt a cautious approach to purchasing, indicating a potential continuation of the oversupply situation. Disruptions in the Red Sea route and domestic producers' stockpiling activities ahead of the Spring Festival have only mildly stimulated demand.

Looking ahead to January 2024, Shanghai Metals Market (SMM) forecasts a further decrease in lithium hydroxide production, anticipating a figure of 18,720 mt. This represents an 8% MoM decline and a 12% YoY drop, continuing the trend of reduced output in this sector.