Is the lithium price reaching a turning point?

The lithium carbonate market is experiencing a wave of "irrational rebound" — the price of battery-grade lithium carbonate surged from 60,500 yuan/ton in May to the range of 77,000 yuan/ton in July, an increase of over 25% in just two months.

Behind this round of skyrocketing prices is the short-term stimulus from the growing demand for new energy vehicles and energy storage, coupled with supply-side disturbances such as production cuts and restrictions. However, the rebound in lithium prices hides concerns: the global surplus of lithium resources remains unchanged, and the pressure to release production capacity still exists. Is this rebound a precursor to a turning point in supply and demand, or just a fleeting moment under capital speculation? What kind of trend will lithium prices show in the second half of the year?

Strong Sentiment for Production Cuts on the Supply Side

The direct trigger for the recent rise in lithium carbonate prices is mainly driven by expectations of production cuts on the supply side. It was reported that the Yichun City Natural Resources Bureau issued a document on July 14, conducting historical approval issue checks on eight lithium mining companies in its jurisdiction, rectifying issues such as non-compliance with approval processes, environmental standards not being met, or illegal mining; on July 17, Zangge Mining announced that its wholly-owned subsidiary Zangge Lithium Industry had been ordered to cease production and rectify due to illegal mining activities.

"The market is worried that lithium mica mining companies in Jiangxi and other places may also face capacity reductions due to issues with mining license renewals, amplifying market panic over supply gaps," a lithium carbonate product manager from a futures company pointed out to the reporter from China Energy News. From the actual supply and demand structure, current lithium carbonate procurement is still mainly based on long-term agreements and customer orders, with limited spot market transactions. Terminal demand has not shown substantial growth, reflecting a market characteristic of "strong expectations, weak reality," which may be difficult to support sustained high prices.

As a key raw material for lithium battery cathodes, the price trend of lithium carbonate directly reflects changes in the supply and demand pattern of the lithium battery industry chain. Over the past decade, the industry has experienced two cycles of fluctuations: during the first cycle from 2015 to 2019, driven by policies for new energy vehicles, prices soared from 40,000 yuan/ton to 180,000 yuan/ton before falling back; the second cycle, which began in 2020, was even more intense, with explosive growth in global lithium battery demand, while lithium resource development was constrained by a 3-5 year production cycle, leading to severe mismatches in supply and demand. Prices soared from the 2020 low to a historical peak of 600,000 yuan/ton in 2022, and then fell to around 60,000 yuan/ton due to a flood of capital entering the market. This price level is close to the production cost line of some high-cost capacities, leading the industry into a dilemma of "the more losses, the more production; the more production, the more losses."

Against the backdrop of "anti-involution" in new energy vehicles, industry chain companies are actively adjusting their business strategies, hoping to break free from "low-price competition" through capacity self-discipline and inventory optimization, resulting in strong sentiment for production cuts on the supply side.

Surplus Pattern May Continue in the Second Half of the Year

However, from the actual supply and demand structure, it is difficult to say that the lithium carbonate industry will reverse in the short term.

The aforementioned product manager pointed out that downstream cathode material manufacturers have a low willingness to accept this round of price increases, generally opting to meet production needs through increased long-term agreements. Only a few companies have supported market prices due to rigid procurement needs, pushing the price center of lithium carbonate to continue rising. On the supply side, first and second-tier lithium salt manufacturers are continuously expanding their market share due to their low-cost and integrated advantages, and it is expected that domestic lithium carbonate total production will increase by over 30% year-on-year in the second half of the year At the same time, the overseas market is still showing some incremental growth, with shipments from Chile remaining stable at high levels and production in Argentina continuously increasing. Overall, the supply of lithium carbonate remains strong, and it is expected that there will continue to be an oversupply of lithium carbonate in the second half of the year.

Data shows that from January to June this year, domestic sales of new energy vehicles increased by 40.3% year-on-year, but the year-on-year growth rate for June alone has dropped to 26.7%, naturally slowing down due to the high base effect; in terms of energy storage, policies have halted mandatory energy storage for new energy, and in the first quarter of this year, the newly commissioned capacity of new energy storage projects in China was 5.03 gigawatts/11.79 gigawatt-hours, a year-on-year decrease of 1.5%/5.5%.

Yu Qingjiao, Secretary-General of the New Battery Technology Innovation Alliance in Zhongguancun, pointed out to reporters from China Energy News that the current lithium carbonate market is still in a deep game stage, exhibiting typical "weak balance" characteristics. The demand growth rate from downstream battery and vehicle manufacturers is slowing, and procurement remains a necessity; upstream manufacturers are stabilizing prices through proactive production cuts. This tug-of-war between supply and demand has led to a stalemate in lithium carbonate prices—on one hand, conventional demand is insufficient to support a significant price rebound; on the other hand, the price floor of high-cost mines provides strong support. The industry is undergoing a long process of capacity clearing, and prices may continue to fluctuate around the cost line until a new supply-demand balance emerges.

Companies Actively Respond to Cyclical Fluctuations

In the context of deep industry adjustments, lithium carbonate companies have to optimize pricing mechanisms and implement integrated layouts to cope with cyclical fluctuations.

Recently, leading lithium carbonate company TIANQI LITHIUM disclosed its half-year report forecast for 2025: achieving a net profit of 0 to 155 million yuan, turning losses into profits. TIANQI LITHIUM stated that due to fluctuations in the lithium product market, the sales prices of its lithium products have decreased compared to the same period last year, but thanks to the shortened pricing cycle of its holding subsidiary Windfield Holdings Pty Ltd, the impact of the previous time cycle mismatch between its wholly-owned subsidiary Talison Lithium Pty Ltd's chemical-grade lithium concentrate pricing mechanism and the company's lithium chemical product sales pricing mechanism has been significantly reduced.

"The growth logic of the company comes from its own operational optimization rather than an overall recovery in the industry," Yu Qingjiao pointed out. TIANQI LITHIUM has optimized its pricing mechanism (changing from quarterly pricing adjustments to monthly pricing), enhancing the company's responsiveness to market price fluctuations, effectively alleviating cost mismatch pressure and smoothing performance fluctuations, but at the same time, it has compressed profit margins due to being closer to spot prices; Ganfeng Lithium relies on an integrated layout across the entire industry chain (resources—materials—battery recycling) to diversify operational risks. However, heavy asset operations and diversified management pose higher demands for cost control and resource synergy.

"The monthly pricing mechanism, with its market sensitivity and rapid response capability, is becoming a key tool for companies to maintain healthy cash flow," the aforementioned product manager further pointed out. Currently, leading companies in the industry can still maintain certain profits, while small and medium-sized enterprises will face increasingly difficult survival crises under price inversion pressure. Leading companies with financial advantages may achieve low-cost expansion through mergers and acquisitions, thereby accelerating the overall capacity clearing in the industry Author of this article: Lu Qixiu, Source: China Energy News, Original title: "Is Lithium Price Reaching a Turning Point?"

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