In the short term, the "strong reality" of fundamentals provides support for lithium prices, and it is not likely that the supply and demand will significantly exceed expectations this year, i.e., the upstream supply will not exceed expectations and rapidly supplement the increment or the downstream demand will suddenly collapse.
Since November, the futures price of lithium carbonate has experienced a process of accelerating upward followed by wide - range shock adjustments. After the main contract broke through 100,000 yuan/ton, it started to decline and adjust. Currently, the market is in a wide - range shock, market divergence has intensified, and intraday volatility is high. The main contract of lithium carbonate futures rose nearly 20% in November, and the closing price on December 9th was 92,800 yuan/ton.
Short-term fundamentals provide support for lithium prices through a "strong reality," making it difficult for a significant surplus of supply and demand to occur within the year. Under the logic of a tight balance between supply and demand, lithium prices are more likely to rise than fall. However, as the season gradually enters the off-season, the new driving forces from fundamentals may weaken. In the medium term, after several years of a price decline cycle, lithium prices have already established a basis for recovery in terms of valuation and sentiment. Moreover, the outbreak of the current energy storage demand provides new impetus, and the price benchmark is expected to move up next year.
Short-term fundamentals are supported.
On the supply side, China's lithium carbonate output in November was 95,350 tons, an increase of 3,090 tons month-on-month and a year-on-year growth of 49%. The planned output of lithium carbonate in December is expected to continue to increase, potentially rising to a high of 98,210 tons. Some of the previously overhauled spodumene and mica lithium extraction production lines have resumed operation, and some small-scale contract manufacturers have provided the main increase. Affected by the weather, there is still an expectation of a slight reduction in the output from salt lakes. In addition, the recycling output has decreased slightly.
The expectation of the resumption of production at the Li mine in Ji Xia Wu in Ningde has already been partially fulfilled, although there are still differences in the market regarding the actual timing of the resumption. However, recent progress has been made in the resumption process, and once the resumption is actually implemented, the short-term supply of lithium carbonate may receive some supplementation.
Recently, the price of lithium mines is closely linked to the price of lithium salts. Due to long-term agreements locking in more sources of supply, the market circulation of refined ore has been reduced, the mine end has maintained a tight state, and the quotation is relatively firm.
According to the statistics of Zhonglianjin, the monthly arrival volume of lithium concentrate in Australia is expected to be around 380,000 tons in November and December, and the overall lithium concentrate inventory is expected to remain at a low level. If the increase in the arrival volume of containerized lithium concentrate is considered, the inventory may increase slightly. Overall, the short-term supply-side uncertainty is relatively strong, and it is expected to maintain a slight increase trend within the year.
During the demand peak in September-October this year, the unexpected growth in demand has become an important driving factor for the rise in lithium prices in this round.
In terms of the power battery market, the strong performance was driven by factors such as the accelerated construction of charging piles and the upcoming expiration of tax incentives for the purchase of new energy vehicles, which triggered a "rush to buy".
On the energy storage market front, large storage orders have erupted after the third quarter, and industry feedback indicates a shortage of battery cells.
From the data, in the process of this round of lithium carbonate price increase, the price transmission to the downstream is relatively smooth.
The demand for lithium carbonate in November was 133,451 tons, an increase of 6,490 tons compared to the previous month and a year-on-year increase of 42.02%; the demand is expected to decline slightly to 130,418 tons in December.
Against the backdrop of the outstanding performance of battery cells, the production volume of positive electrode materials continues to grow rapidly, with leading companies operating at full capacity. This year, there has been a significant increase in orders for power heavy trucks, and orders for energy storage have been very popular, with most material companies maintaining a high level of production. The production of lithium iron phosphate materials has become more diversified, and it is expected that the output of lithium iron phosphate in December will be 40,955 tons, a decrease of 0.8% compared to the previous month and an increase of 54% year-on-year. The output of ternary materials is expected to be 78,280 tons in December, a decrease of 6.7% compared to the previous month and an increase of 37.3% year-on-year.
The demand curve has become flatter this year as the storage market has exploded, and from various data and industry feedback, it is basically clear that the demand side of this year's "off-season is not off-season".
It is worth noting that there are signs of weakness in the power battery market recently. After the breakthrough of 50% in the penetration rate of new energy vehicles, there are upper limits, and the marginal growth rate has significantly slowed down; the strong growth of the energy storage market in the short term has a certain pull on prices, but whether it can form a sustainable support still needs to be gradually verified after the first quarter of next year, and the currently extremely optimistic expectations may overvalue some demand.
From the perspective of inventory performance, the entire industry has reduced its inventory by more than 10,000 tons in November, and since December, the inventory has decreased by 2,000 to 3,000 tons per week, which to some extent confirms the strong demand from the downstream.
From the perspective of inventory structure, the overall upstream has maintained a trend of destocking; the downstream material link began to restock at the beginning of August, but from the beginning of October to now, under the premise of sufficient advance stockpiling and the amplifying pressure of lithium carbonate price fluctuations, the inventory of the material link has gradually decreased; the inventory data of the battery and other links have remained stable. Due to the large amount of hidden inventory outside the sample range of the trade link, according to the feedback of the spot market, the accumulation of inventory is large, and there may be off-balance sheet inventory pressure.
On the side of warehouse receipts, after the National Day holiday, the exchange's warehouse receipts quickly declined, but from November, the delivery profit decreased, and the rate of decline in warehouse receipts slowed down significantly. After a recent batch of warehouse receipts were canceled, a new round of registration gradually began.
The strong performance in the early stage more reflected the resonance between sentiment and fundamentals based on the "strong reality". The determination of the fundamental balance within the year is relatively strong, which supports the price of lithium carbonate. Subsequently, we will focus on the progress of the big factory's resumption of production and the release of new projects under the high price, as well as the performance of the demand side under the background of the off-season. In the short term, the inventory still maintains the decumulation, and there may be an expectation gap in the digestion speed of the off-exchange implicit trade inventory and the explicit warehouse receipt.
Medium-term fundamental analysis
The supply side is still in the expansion cycle.
In 2025, the global lithium resource supply side is still in the capacity expansion cycle. By the end of the year, the global lithium carbonate smelting capacity will exceed 2 million tons, a 26.5% increase compared to the end of 2024. Among them, the domestic smelting capacity will exceed 1.5 million tons. The increase in upstream supply mainly starts to be released after the third quarter. The expected differences brought about by supply - side disturbances are mainly manifested in the reduction and suspension of production of some Australian lithium mines during the decline of lithium salt prices in the first half of the year, the rectification of mining rights for domestic mica and salt - lake projects in the second half of the year, and the supply stability issues caused by riots in countries like Mali in Africa. Overall, the growth trend of lithium supply is still clear. The global lithium supply in 2025 is expected to reach 1.636 million tons, a year - on - year increase of about 22.1%. Judging from the production plans of enterprises, the upstream is still in the production - increasing period in 2026. The main projects include Greenbush, Goulamina, Pilgangoora P1000, Bougouni, Mariana, Sal de Oro, 3Q, Salt Lake Co., Ltd. and Qinghai Huixin. These projects will gradually bring an increase in supply in the first half of the year, and new production projects in South America, Europe and China will also release a certain increase in supply in the second half of the year. In addition, if the central price of lithium salt moves up and remains relatively strong, the Australian lithium mine projects and domestic mica projects that were subject to cost pressures and underwent production reduction and technological transformation in the first half of this year may accelerate their resumption of production.
Demand growth driving structural shift
Currently, downstream demand for lithium salts is mainly driven by the consumption of lithium battery materials. Over the past 5 years, new energy vehicle power batteries have always played a dominant role in the demand structure of lithium carbonate, accounting for more than 70% of the demand. However, the most significant change in the market since the second half of this year, especially in the fourth quarter, is the surge in storage demand driving the transformation of the lithium carbonate consumption structure. As of October, the monthly output of storage battery cells has increased from 23.8% in the middle of the year to 40.3%. In the medium term, the driving force for demand growth may switch.
The overall power battery market continues to maintain robust growth. Since this year, the "two new" policies have accelerated their implementation, combined with the new product launches from automakers and the promotion of car shows in many places, the sales volume and the number of insurance policies of the new energy vehicle market have maintained a high growth rate, and the inventory-to-sales ratio of power batteries has continued to decline.
The data released by the China Association of Automobile Manufacturers showed that from January to October, a total of 12.037 million new energy passenger cars were produced, a year-on-year increase of 30.3%; a total of 12.058 million new energy passenger cars were wholesale, a year-on-year increase of 29.9%. The retail penetration rate of new energy passenger cars was 57.2%, an increase of 4.3 percentage points compared to the same period last year.
The highlights of the power battery sector this year mainly reflected in the high-speed growth of demand for new energy commercial vehicles and heavy trucks, the increase in the proportion of pure electric passenger cars, and the strong performance in the peak season. The strong performance of power battery production in the peak season is mainly due to the pre-purchase consumption caused by the expiration of the new energy vehicle purchase tax preferential policy. However, the new energy power battery market has entered a period of stable development. After the market penetration rate of new energy vehicles breaks through 50%, the marginal growth rate has significantly slowed down, and the incremental space is facing constraints. The growth driver in the domestic market in 2026 may lie in the improvement of battery capacity under the requirement of long range and the improvement of economic efficiency in the heavy truck market.
The big bang of the energy storage sector this year is a fact, and the growth of energy storage demand is a consistent market expectation, the disagreement lies in whether the future energy storage market can form a longer-term narrative. The fundamental reason for the outbreak of the energy storage market and the formation of a periodic expectation at present is the improvement of the economic benefits of energy storage projects, which drives the demand for energy storage from policy-driven to market-driven. For a long time before that, the energy storage in the domestic market was mostly a mandatory matching project for photovoltaic projects, and investors mainly calculated the overall benefits of photovoltaic projects, and energy storage was only used as a cost item.
According to the "Notice on Deepening the Market-oriented Reform of the Feed-in Tariff for New Energy and Promoting the High-quality Development of New Energy" jointly issued by the National Development and Reform Commission and the National Energy Administration, all new photovoltaic projects need to enter the market-oriented transaction starting from January 1, 2026, and will no longer enjoy the guaranteed purchase, which has led to the risk of negative electricity prices for photovoltaic power generation during the peak hours of the day, thus creating a real market demand for energy storage. In addition, the price of upstream raw material lithium carbonate has been in a downward cycle in the past two years, and the reduction of raw material costs and policy changes have jointly promoted the gradual profitability of domestic energy storage projects. In terms of overseas markets, the US Inflation Reduction Act has significantly increased the returns on energy storage projects through investment tax credits and production tax credits. From the past industry development rules, cost advantages are indeed the key driving factors for energy substitution, and the previous round of new energy power market burst was driven by the market's spontaneous expansion led by the decline in power costs. Compared with the new energy power market, which is constrained by the penetration rate, the ceiling of the energy storage market is higher.
Outlook
In the short term, the "strong reality" of fundamentals provides support for lithium prices, and it is not likely that the supply and demand will significantly exceed expectations this year, i.e., the upstream supply will not exceed expectations and rapidly supplement the increment or the downstream demand will suddenly collapse.
Under the logic of tight supply and demand balance, there is support for lithium carbonate prices within the year, which is easy to rise but difficult to fall. However, after gradually entering the off-season, the new driving force of the fundamentals may weaken. If the subsequent bearish factors start to be realized substance, market fluctuations may increase. From the market performance, the recent single-driven trend has significantly weakened. Although the fundamentals are still strong, there are limited substantive new positive factors, and in the short term, there are issues such as the resumption of production by major factories and the sustainability of demand in the off-season, which may limit the upward space of lithium carbonate prices. In the short term, market sentiment has weakened, and there are still differences. It is expected that the market will mainly be adjusted in a wide range.
In the medium term, after several years of a price cycle decline, lithium prices have already built a foundation for an increase in valuation and sentiment, and the outbreak of this round of energy storage demand has provided new driving factors, and the price center is expected to shift upward by 2026.
What needs to be noted is that the current expectations for demand are still in the "storytelling" stage. If the storage market continues to grow after the first quarter of 2026, it will confirm the signal of a cyclical increase in demand. In addition, the supply side is still in the period of capacity release. In the context of sustained high prices, the growth rate of upstream projects may accelerate, and the incremental increase brought by the resumption of production of previous production reduction and suspension projects should also be considered as a variable factor. What needs to be warned is that in an extremely optimistic market, a consistent expectation may lead to deviations. In terms of rhythm, market sentiment is strong, and the supply side is expected to release a large amount in the first half of next year, and demand is in the off-season. The price of lithium carbonate may experience a downward adjustment. When the growth of demand is gradually confirmed, the price center may start to rise.
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