Recently, China's new energy vehicle market has entered a phase of adjustment, impacting expectations for lithium carbonate demand. According to institutional statistics, in January, retail sales of new energy passenger vehicles in China declined by approximately 20% year-on-year, with a notable month-on-month adjustment. This primarily stems from seasonal factors around the Spring Festival, temporarily weighing on terminal demand. From an industrial chain perspective, battery production and vehicle assembly volumes have experienced a temporary misalignment: leading battery manufacturers maintain relatively stable production schedules, partly supported by export and energy storage orders, alongside the concentrated delivery effect preceding adjustments to the value-added tax rebate policy. Conversely, genuine battery demand within the domestic passenger vehicle sector currently exhibits signs of temporary deceleration. Should domestic new energy vehicle sales persist within this adjustment phase, it may temporarily disrupt the consumption rhythm of upstream lithium carbonate, potentially exacerbating short-term fluctuations in supply chain inventories and prices. However, with the implementation of consumption-boosting policies in the opening year of the 15th Five-Year Plan, market demand is expected to gradually stabilise and rebound.

Geopolitical conflicts continue to impact the global automotive supply chain through logistics and trade channels. Following the Spring Festival, shipping rates on major routes have generally risen, with several container shipping companies announcing fare increases for Europe, the Mediterranean and other routes from March onwards. Against the backdrop of heightened tensions between the US and Iran, market concerns over rising supply chain costs have intensified. Recalling the period of sharp shipping rate increases in 2021, component manufacturers with a high proportion of overseas revenue experienced significant pressure on their gross profit margins. Currently, China's automotive component manufacturers have established more comprehensive overseas operations. However, enterprises with high export dependency and insufficient localised supply chains continue to face pressures from rising costs and narrowing profit margins. These pressures are subsequently transmitted to vehicle manufacturing costs and end-user demand, indirectly affecting projections for power battery and lithium carbonate demand.

The Middle East represents a significant growth market for future large-scale energy storage and renewable energy projects. According to CESA data, by 2025, Chinese enterprises' new overseas energy storage orders and cooperation scale will reach 353GWh, a 94% year-on-year increase, with the Middle East accounting for 12% of this total. Escalating geopolitical conflicts in the region will elevate risk premiums, delaying project approvals, financing, and construction timelines. This will postpone the realisation of potential energy storage demand, exerting downward pressure on market sentiment and order rhythms in the short to medium term.

Despite these near-term demand pressures, the core drivers underpinning lithium carbonate prices remain fundamentally intact in the long run.

Firstly, low inventories provide price elasticity. SMM data indicates that post-Spring Festival, domestic lithium carbonate social inventories have continued to decline, falling to approximately 100,000 tonnes – the lowest level since July 2024. These low stock levels imply a thin buffer within the supply chain, meaning prices could still exhibit significant elasticity should demand marginally improve.

Secondly, the fundamental logic of the new energy vehicle industry remains unchanged. Technologically, China maintains leadership in both power battery and vehicle manufacturing supply chains, with per-vehicle battery capacity steadily increasing. Demand-side structure shows robust growth in European new energy vehicle sales, Chinese commercial vehicle sales, and energy storage battery demand, partially offsetting temporary weakness in domestic passenger vehicle demand. Electrification and energy storage remain long-term trends, and lithium carbonate's medium-to-long-term demand trajectory remains unaffected by short-term volatility.

Thirdly, supply-side uncertainties persist long-term. Against a backdrop of normalised geopolitical conflicts, beyond Zimbabwe's abrupt export policy shift, major lithium-producing nations face enduring uncertainties regarding environmental regulations, resource nationalism, and export controls. The commissioning pace of new projects and trade flows may repeatedly encounter disruptions. Should supply contract or uncertainties intensify, this would continue to underpin lithium carbonate prices.

In summary, the lithium carbonate market faces three immediate pressures: subdued domestic new energy vehicle demand, rising automotive supply chain costs driven by geopolitical conflicts, and suppressed potential energy storage demand due to Middle Eastern tensions. However, from a medium-to-long-term perspective, with inventories at absolute lows and geopolitical constraints becoming a normal feature of the supply chain, the upward price cycle for lithium carbonate remains intact.

Looking ahead, should domestic new energy vehicle sales stabilise and rebound under policy and price incentives, while energy storage and export orders maintain resilience, market pessimism may be alleviated. Should demand persistently remain weak, caution is warranted regarding the possibility of lithium carbonate prices continuing to fluctuate at low levels within the ¥120,000–¥130,000 per tonne range.

As an integrated internet platform providing benchmark prices, on March 11, SunSirs' benchmark price for lithium carbonate (industrial grade) was RMB 157,000.00/ton, a decrease of 7.65% compared to the beginning of the month (RMB 170,000.00/ton).

Application of SunSirs Benchmark Pricing：

Traders can price spot and contract transactions based on the pricing principle of agreed markup and pricing formula (Transaction price=SunSirs price + Markup).

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.