China’s automotive output, sales drop in July amid reduced buying in summer lull

China’s automotive output and sales both fell in July, on a month-on-month and year-on-year basis, because of reduced seasonal demand in the summer season and the higher base in July 2022, the China Association of Automobile Manufacturers (CAAM) said this week

Chinese car manufacturers produced 2.40 million units in July, down by 6.2% from June and down by 2.2% compared with July 2022. Sales decreased by 9% month on month and by 1.4% year on year to 2.39 million units, according to CAAM data released on August 10.

CAAM said that while July is traditionally the off-season in the automotive market, with relatively weak demand and a slowdown in the pace of production and sales, in July 2022, output and sales showed high growth due to China introducing policies to stimulate consumption.

In the first seven months of 2023, China’s automobile output rose by 7.4% year on year to 15.65 million units while sales increased by 7.9% in the same comparison to 15.63 million units.

In terms of the electric vehicle (EV) sector, China produced 805,000 EVs in July 2023, up by 2.7% month on month and by 30.6% year on year. EV sales in July amounted to 780,000 units, down by 3.2% month on month, but up by 31.6% year on year.

Steel CRC prices

Fastmarkets’ weekly price assessment for steel CRC, domestic, ex-whs Eastern China was 4,610-4,650 ($637-643) yuan per tonne on Friday August 11, widening down from 4,620-4,650 yuan per tonne a week earlier – which was the highest level since mid-April – and up from 4,500-4,530 yuan per tonne on July 14.

Spot CRC prices held onto their gains despite the recent pullback in steel futures prices, likely because of “not strong” inventory pressure, an industry analyst in eastern China told Fastmarkets.

CRC inventories held by traders in 21 major Chinese cities totaled 1.25 million tonnes at the end of July, down by 40,000 tonnes, or 3.1%, compared with July 2022, according to data from the China Iron & Steel Association.

Several traders said that CRC demand remained subdued of late in the wake of the recent retreat in steel futures prices, with the market focus shifting back to subdued demand amid the ongoing seasonal lull, a lack of stimulus measures and speculation about production curbs, the eastern China-based industry analyst said.

But leading Chinese steelmakers, including Baoshan Iron & Steel (Baosteel), increased their CRC prices for a second straight month last week in anticipation of a pick-up in demand during the high season when a raft of stimulus measures are expected to be introduced.

Baosteel said on August 10 that it would raise its CRC base prices by 150 yuan per tonne month on month for September’s domestic bookings, following an increase of 100 yuan per tonne for August.

ADC12 aluminium market inactive

China’s domestic ADC12 aluminium ingot alloy market continued to be quiet during the summer lull.

Fastmarkets’ weekly price assessment for aluminium alloy ADC12, exw dp China was unchanged at 18,500-18,700 yuan ($2,558.83-2,586.49) per tonne on Wednesday August 9. The ADC12 price was 17,800-18,100 yuan per tonne in the beginning of July.

The price rise in over past month was mainly driven by higher aluminium prices rather than downstream demand, sources said.

“The up and down of ADC 12 prices usually follows changes in aluminium prices. Besides, the longstanding issue of tight supplies of aluminium scrap in China also lent some support to alloys prices,” an ADC12 supplier said. “Regarding downstream demand, I’ve not noticed any obvious improvement.”

A second ADC12 supplier said: “Although demand from the new energy vehicle(NEV) sector has increased a little bit, overall demand from [the automotive] industry remains weak.

“The spot market is illiquid and downstream consumers are keeping inventories at low levels and are cautious about purchasing raw materials,” the supplier added.

Apart from a weak Chinese domestic market, sources said exports of alloys to Japan also remained sluggish, which also weighed on China’s domestic market.

“Given its relatively higher prices, Chinese alloy cannot compete with products from other countries in the Japanese market,” a third supplier said. “Japanese buyers have also been slow to purchase raw materials so far this year.”

Fastmarkets’ weekly price assessment for aluminium ingot ADC 12 spot (MJP), cfr Japan was $2,100-2,180 per tonne on Wednesday, unchanged from previous week.

Downward pressure on battery raw materials prices 

Spot lithium prices in China’s domestic market remained on a downtrend in the week to August 10, amid muted spot demand and bearish sentiment.

Sources told Fastmarkets that cathode producers have barely purchase spot lithium salts over the past month, due to the slow recovery in demand for batteries and expectations that prices could further weaken in the near term.

“I think lithium prices could remain in a downtrend in the near term because I don’t expect to see any significant recovery in demand for lithium salts,” a Chinese lithium producer source said. “Lithium producers have stock accumulated, which adds more pressure to prices.”

Cathode producers have continued to struggle to shift the pressure of high production costs because of lithium prices to the battery producers and have consequently minimized their spot purchases and instead relied on long-term supplies, Fastmarkets understands.

And the lithium hydroxide market has been under even greater downward price pressure recently, due to the nickel cobalt manganese (NCM) cathode sector in China being more sluggish than the market for lithium iron phosphate (LFP), leading to the hydroxide market being even quieter than the lithium carbonate market.

Fastmarkets’ weekly assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 230,000-250,000 yuan per tonne on August 10, down by 20,000 yuan per tonne from 250,000-270,000 yuan per tonne a week earlier. The price stood at 290,000-310,000 yuan per tonne on July 6.

Fastmarkets’ weekly assessment for lithium hydroxide monohydrate, LiOH.H2O 56.5% LiOH min, battery grade, spot price range exw domestic China was 220,000-240,000 yuan per tonne on August 10, down by 20,000-30,000 yuan per tonne from 240,000-270,000 yuan per tonne a week earlier. The price stood at 270,000-300,000 yuan per tonne on July 6.

Prices for cobalt sulfate, another key battery raw material, have continued the downtrend seen in the second half of July, under pressured from slowing demand from downstream precursor producers and bearish sentiment, mainly due to the expectation of increasing raw materials supplies.

Fastmarkets’ price assessment for cobalt sulfate, 20.5% Co basis, exw China was 38,000-39,000 yuan per tonne on August 11, down by 1,000 yuan per tonne from 39,000-40,000 yuan per tonne from August 9, and down by 5,000 yuan per tonne from 43,000-44,000 yuan per tonne on July 5.

“Demand for cobalt sulfate has retreated since the second half of July. with buyers hesitating about accepting higher prices,” a cobalt sulfate producer source said. “We have kept lowering our prices to test the market and are still monitoring the [situation, but wider] market sentiment has remained bearish over the past month.”

Besides the reduction in downstream demand, expectations of increasing supplies of cobalt sulfate’s raw material, cobalt hydroxide, have also put pressure on the cobalt sulfate market.

“More buyers expect [to see] an oversupplied market in the fourth quarter, which also makes them slow down current purchases of cobalt hydroxide and further [subdues] cobalt hydroxide prices, which, in turn, [does not] support downstream cobalt sulfate prices,” a trader told Fastmarkets.

Fastmarkets’ weekly cobalt hydroxide index 30% Co min, cif China was calculated at $8.41 per lb on August 11, down by $0.35 per lb from $8.76 per lb a week earlier – down by $1.05 per lb from $9.46 per lb on July 7 and down by $2.16 per lb from this year’s high of $10.57 per lb achieved on July 21.

Nickel sulfate prices in China, meanwhile, have lost upward momentum over the past month, under pressure from languishing downstream demand, with spot business thin amid buying apathy.

Fastmarkets’ weekly price assessment for nickel sulfate min 21%, max 22.5%; cobalt 10ppm max, exw China was 29,500-30,500 yuan per tonne on Friday, down from 30,500-31,500 yuan per tonne, or 3.23%, on August 3 and down for the third week in a row.

“Nickel sulfate producers are under significant pressure, with only a few major ones being able to take materials under the current margins,” a supplier source told Fastmarkets, adding that the market had not yet hit the bottom.

Despite the rapid growth of NEV sales from January to July, weakness continued in the anode raw materials sector, including both natural and synthetic graphite.

Fastmarkets’ latest weekly assessment for graphite flake 94% C, -100 mesh, fob China stood at $590-620 per tonne on Thursday, August 11, in line with the previous assessment but down by 4.65% in a space of a month.

On the same day, the price for graphite spherical 99.95% C, 15 microns, fob China was at $2,000-2,200 per tonne, holding steady at an 11-year low since June.

But market participants believe that the price is unsustainably low for uncoated spherical graphite and producers are losing money, Fastmarkets understands.

“Although there has been a slight recovery in the downstream anode sector, it is difficult to increase the price given that buyers are bidding [lower] and competition is fierce in mid-stream processing,” a spherical graphite producer in China said.

Flake fines prices have plunged by 27.11% since the start of 2023, which means less support for spherical graphite, according to a trader source.

“The price for flake fines might head down further given the current market conditions,” the source said.

Elsewhere, a bearish synthetic graphite market put further downward pressured on the upstream anode sector.

Fastmarkets’ latest weekly price assessment for petroleum needle coke 0.5% S, ex-works China stood at 5,000-5,500 yuan ($694-764) per tonne on August 9, narrowing down by 4.55% from 5,000-6,000 yuan per tonne on August 2.

“While sellers have tried to increase their offer prices in the past couple of weeks, it is difficult to attract deals with higher prices due to lower acceptance among buyers. The support from increased oil slurry prices – [a key] raw material for needle coke production – is waning, with suppliers of needle coke struggling with high costs and with market share potentially being lost due to an ongoing shift from needle coke to green petroleum coke,” a producer of needle coke said.

Fastmarkets’ weekly assessment for green petroleum coke 0.5% S, ex-works China was unchanged at 3,000-4,000 yuan per tonne on August 7.

Fastmarkets’ latest weekly price assessment for manganese sulfate 32% Mn min, battery grade, exw mainland China, meanwhile, was at 5,000-5,650 yuan per tonne on August 10, stable from a week earlier, albeit down slightly in the month of July.

Manganese sulfate producers have also been struggling with higher costs and downward pressure on prices because of slow buying by downstream cathode producers, sources said.

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