China’s auto sector recovers in May, but raw materials market mixed

China’s automotive output and sales posted year-on-year growth in May amid measures to promote consumption during the May Day holiday and due to a low base a year earlier, the China Association of Automobile Manufacturers (CAAM) said

Car manufacturers in China produced 2.33 million units in May, up by 9.4% from a month earlier and 21.1% higher year on year. Meanwhile, sales increased by 10.3% month on month and by 27.9% year on year to 2.38 million units, according to CAAM data released on Friday June 9.

The whole auto sector has been recovering moderately since April though pressure persists. The consumption promotions measures adopted by many regions in China during the May Day holiday contributed to the market recovery. Output and sales in May 2022 were also low as a result of restrictions to control the spread of Covid-19, CAAM said.

Electric vehicle (EV) production rose in May, with output of pure EVs, hybrid EVs and fuel-cell EVs increasing by 53% from a year earlier to 713,000 units in May.

China’s EV sales rose by 60.2% year on year to 717,000 units in May.

Cold rolled steel (CRC) prices rise from six-month low

Fastmarkets’ weekly price assessment for steel CRC, domestic, ex-whs Eastern China was 4,440-4,490 ($623-630) yuan per tonne on Friday June 9.

That is down from 4,450-4,500 yuan per tonne on May 12, but up from 4,320-4,380 yuan per tonne – a low not seen since December 2022 – on May 26.

Increased expectations for stimulus measures from the Chinese government and banks’ recent cuts to deposit interest rates contributed to the recent rally in Chinese steel prices, but the absence of a substantial improvement in downstream demand and limited reduction in production have limited upside potential for steel prices, market participants said.

CRC inventories held by traders in 21 major Chinese cities totaled 1.19 million tonnes by the end of May, marking the lowest level so far this year and down by 80,000 tonnes (6.3%) from a year earlier, according to data from the China Iron & Steel Association.

Leading Chinese steelmakers including Baoshan Iron & Steel said on June 9 that they would keep their CRC base prices unchanged month on month for July’s domestic bookings, after a cut of 200 yuan per tonne for June.

“Domestic sales have improved from April and May,” a mill source in northern China said in early June.

But a trader in eastern China said around the same time that he did not see a significant improvement in spot CRC trading, with downstream users remaining cautious.

Aluminium die casting (ADC) 12 market remains weak

China’s domestic aluminium ingot alloy ADC12 market stayed subdued due to weak demand, despite automobile production and sales in China increasing in May.

Fastmarkets’ price assessment for aluminium alloy ADC12, exw dp China fell to 17,900-18,100 yuan per tonne on June 7, widening downward by 100 yuan per tonne from 18,000-18,100 yuan per tonne a week earlier. The price was at 18,300-18,500 yuan per tonne in the beginning of May.

Sources said spot trading was very limited because consumers preferred to consume stockpiled material to keep inventory levels low rather purchasing from the market.

“No one wants to hold stock. Buyers only purchase material on a hand-to mouth basis,” a supplier source said.

A second supplier source said: “The alloy market sentiment is pessimistic. Many participants like me hope market demand could improve later this year if car makers increase output and start purchasing raw materials by then.”

EV battery materials market mixed

Chinese lithium prices remained on an uptrend in May, supported by improved downstream demand while traders’ speculative activity and sellers tight hold on units added further strength to the market.

Market participants said production rates for lithium iron phosphate (LFP) battery cathode in May had improved, which translated to higher demand for lithium carbonate.

“Downstream LFP battery cathode production has recovered recently, especially compared with April when production fell to its lowest so far this year,” a Chinese cathode producer source told Fastmarkets.

In the meantime, lithium producers – on expectation of a further strengthening of prices in the near term – held on to spot lithium carbonate tightly during the month.

The same bullish sentiment also led to speculative activity among some lithium traders, which further buoyed the market, market participants noted.

Fastmarkets’ price assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 310,000-330,000 yuan per tonne on Thursday June 8, up by 10,000 yuan per tonne from 300,000-320,000 yuan per tonne a week earlier, and up by 100,000-110,000 yuan per tonne from 200,000-230,000 yuan per tonne on May 4.

But nickel cobalt manganese (NCM) battery cathode production only showed limited recovery last month, consequently weakening demand for lithium hydroxide.

China’s lithium hydroxide prices still increased over May though, driven by a strengthening lithium carbonate market, participants said.

Fastmarkets’ price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price range exw domestic China was 300,000-352,000 yuan per tonne on Thursday June 8, up by 10,000-32,000 yuan per tonne from 290,000-320,000 yuan per tonne a week earlier, and up by 80,000-102,000 yuan per tonne from 220,000-250,000 yuan per tonne on May 4.

Prices for cobalt sulfate, another key battery raw material, have started to trend upward from mid-May, driven by improved demand from downstream buyers and traders.

Fastmarkets’ price assessment for cobalt sulfate, 20.5% Co basis, exw China was 39,000-40,000 yuan per tonne on Friday June 9, up by 1,000 yuan per tonne from 38,000-39,000 yuan per tonne on June 7, and 5,000 yuan per tonne higher than May 10’s 34,000-35,000 yuan per tonne, which was the lowest level this year.

“Increased buying among buyers and traders have made most cobalt sulfate sellers insisting on higher prices. Moreover, cheaper cobalt hydroxide, the regular feedstock for cobalt sulfate, is also hard to come by, which supports the prices at the same time,” a buyer of cobalt sulfate said.

Fastmarkets’ weekly cobalt hydroxide index, 30% Co min, cif China was at $7.76 per lb on June 9, up by $0.19 per lb from $7.57 per lb on June 2. The index was at $7.07 per lb on May 12, the lowest level this year.

Nickel sulfate demand has experienced a modest recovery in the past month with improved sentiment palpable in the spot market, sources told Fastmarkets.

Fastmarkets’ most recent price assessment for nickel sulfate, min 21%, max 22.5%; cobalt 10ppm max, exw China was 32,000-33,000 yuan per tonne on June 9, up by 1.56% from a week earlier.

Prices were mostly rangebound near the prevailing level, but snapped two months of decreases since March in June.

Precursor producers are said to be resuming production partially. This, combined with restocking demand, lent support to the sulfate market.

Nonetheless, market participants remain cautious about any recovery in demand.

“Demand is definitely on the rise, though it’s not that obvious,” a precursor material source said, adding that the improvement was more driven by restocking demand.

Meanwhile, as for uncoated spherical graphite, an upstream material for the production of battery anode, prices held at a 11-year low with market sentiment remaining bearish.

“While there are signs of a moderate demand recovery, the price of spherical graphite is still under pressure with downstream buyers bidding very low. And considering the price for flake graphite has dropped significantly from the start of the year, support for the spherical graphite market is limited,” one spherical graphite producer said.

Fastmarkets’ latest weekly price assessment for graphite spherical 99.95% C, 15 microns, fob China stood at $2,000-2,200 per tonne on Thursday June 8, unchanged week on week, but down by 20.75% from the start of the year.

On the same day, prices for graphite flake 94% C, -100 mesh, fob China were assessed at $670-699 per tonne, down by 0.07% from a week earlier, and 17.53% lower than the start of 2023.

As far as manganese sulfate – another raw material for battery production – is concerned, oversupply continued to put pressure on this market, with minimal buying appetite among downstream consumers.

Fastmarkets’ latest price assessment for manganese sulfate 32% Mn min, battery grade, exw mainland China was at 5,200-6,000 yuan per tonne on Thursday June 8, unchanged for a second week, but down by 22.76% from a year earlier.

“The market could be stable for a while despite weak demand given that most manganese sulfate producers are cutting production to prevent the market from falling further,” a producer source said.

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