Recently, lithium carbonate futures prices have accelerated upward, buoyed by bullish factors including heightened demand growth expectations and delayed resumption of production at major domestic mines.

Limited Supply Increases

In Australia, the Greenbushes mine is on track to bring approximately 520,000 metric tons of concentrate production capacity online by the end of 2025. However, the capacity expansion cycle is lengthy, resulting in relatively limited short- and medium-term supply increases. Among operational mines, Pilgangoora, Kathleen Valley, and Holland are expected to increase supply. However, Mt Marion and Wodgina mines have plans to process low-grade ore, potentially reducing short-to-medium-term supply.

In Africa, the first shipment from the Bougouni mine is imminent, and stable shipments from Malian mines will contribute incremental supply. Additionally, political instability in the Democratic Republic of the Congo (DRC) and significant changes in Nigeria's mining policies have delayed the launch of new capacity at the Manono mine and may disrupt supply from existing mines.

Domestically, Zijin Mining's Daoxian integrated mining and metallurgy project is scheduled to commence production in December 2025, which will bring some supply growth in the short to medium term. The resumption date for CATL's Jianxiawo mine remains undetermined and requires further monitoring.

In Brazil, the Grota do Cirilo mine and Mibra project will contribute modest supply increases upon resumption, though quantities remain limited.

Overall, Australian lithium concentrate production shows steady growth with slight increases expected domestically, while African output faces uncertainties.

For lithium extraction from ore, production resumption and maintenance activities coexist. With expanding resource supply and smelting capacity, ore-based lithium output is projected to grow modestly.

For salt lake extraction, domestic salt lake enterprises are currently in a phase of seasonal production reduction and ramp-up of new production lines, resulting in relatively stable domestic output. Overseas, based on shipment data from Chile and Argentina, exports of South American salt lake lithium to China are projected to decline slightly in the short term. Medium-term outlook: Multiple projects in Argentina remain in capacity ramp-up phases, while Chile's SQM is expanding its lithium hydroxide production lines. China's imports are expected to grow further in the subsequent period.

Recycled lithium extraction continues to face insufficient waste material supply. High lithium carbonate prices have created profit margins for hydrometallurgical lines, suggesting recycled lithium extraction will maintain modest production growth in the short to medium term.

Overall, lithium carbonate supply will maintain an upward trajectory in the short to medium term, though growth potential remains limited and the realization of supply increases carries uncertainty.

Diverging End-Use Demand

This year, China's “Two New Initiatives” policy (large-scale equipment renewal and consumer goods replacement) has been optimized. The fixed subsidy for new energy vehicles has been adjusted to a percentage-based subsidy tied to vehicle price, suggesting stable to moderate growth in domestic NEV sales. Notably, the “Two New” policies have intensified support for green transformation. For instance, they continue to encourage the replacement of operational trucks meeting National IV emission standards or lower with low-emission trucks, prioritizing electric truck upgrades. In reality, the penetration rate of new energy heavy-duty trucks in China still holds significant growth potential. Against the backdrop of enhanced “Two New” policies, sales of new energy heavy-duty trucks are expected to see substantial growth. Overseas, multiple EU member states plan to expand new energy vehicle subsidies, suggesting potential growth in international sales. In the short term, Q1 is traditionally a slow season for new energy vehicle sales. Current production and sales have already shown signs of slowing, with power battery cell output expected to decline slightly in the near term before resuming growth in the medium term.

Additionally, domestic and international energy storage demand remains robust, with leading domestic manufacturers' energy storage cell orders already extending into the second quarter. However, current energy storage cell production capacity faces bottlenecks, limiting significant short-term expansion. Mid-term, as energy storage cell capacity continues to expand, output is expected to grow further.

In summary, lithium carbonate supply growth is limited while end-demand remains divergent, presenting a fundamental outlook of “short-term ease, mid-term tightness.” Currently, the market has already priced in mid-term increases along the lithium carbonate supply chain. Against this backdrop, a significant price gap exists between lithium carbonate futures and spot prices, with downstream buyers showing low acceptance for high-priced supplies. In the short term, lithium carbonate futures prices face correction risks. Following a brief adjustment, mid-term lithium carbonate prices are expected to maintain a relatively strong upward trajectory.

As an integrated internet platform providing benchmark prices, on January 14th, the SunSirs benchmark price for lithium carbonate (battery grade) was 160000.00 RMB/ton, an increase of 34.00% compared to the beginning of the month (119400.00 RMB/ton).

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