SunSirs: Volatility Rocks Lithium Carbonate Futures as Supply-Demand Imbalance Looms into 2026

At the close on December 15, the main lithium carbonate contract 2605 rose by 1.40% to 101,060 CNY/ton, and lithium carbonate futures prices showed a generally strong and volatile trend. The 14th Five-Year Plan clearly emphasizes accelerating the development of strategic emerging industry clusters such as new energy and new materials, intensifying the construction of new energy infrastructure, and speeding up the establishment of a new energy system. Against the backdrop of policy support for green and low-carbon development and the construction of new energy systems, lithium carbonate—being an essential raw material for lithium battery production—is seeing its demand continue to grow along with the expansion of the new-energy vehicle and energy-storage markets.

From a fundamental perspective, weekly lithium carbonate inventories continued to decline at a modest pace, while the weekly lithium carbonate smelting utilization rate saw a slight increase. According to SMM data, as of the week ending December 12, total weekly lithium carbonate inventories fell slightly by 1.88% from the previous week to approximately 111,500 tons. The weekly lithium carbonate smelting utilization rate rose slightly to around 55%, with spodumene-based lithium extraction showing a marginal increase to about 67%; lithium mica-based extraction declined slightly to around 30%; and salt lake-based extraction edged down to about 53%. Demand for power batteries continues to expand. Data from the China Automotive Power Battery Industry Innovation Alliance show that in November, domestic power battery installations reached 93.5 GWh, up 11.2% month-on-month and 39.2% year-on-year.

On December 12, the Guangzhou Futures Exchange released the revised <i>Detailed Rules for Lithium Carbonate Futures and Options Trading at the Guangzhou Futures Exchange</i>. First, the term 'inspection-exempt delivery brands' in Article 53 was changed to 'registered brands,' making the wording more precise. Second, the quality standards for battery-grade lithium carbonate—the deliverable standard—were tightened, thereby improving the overall quality of deliverable products and aligning with industry development trends and corporate needs. The revised quality standards apply to the lithium carbonate LC2612 contract and subsequent contracts. The quality standards for deliverable products are closely aligned with the current state of industry development, which is expected to boost companies’ enthusiasm for participating in delivery operations and help real enterprises manage risks.

From the demand side, dual drivers—power and energy storage—along with green, low-carbon development and the construction of new energy sources, are providing strong support for lithium carbonate demand. On the supply side, several lithium projects have recently come on stream, and more supply is expected to become available in the future. On December 10, Zijin Mining’s first integrated mining, beneficiation, and smelting project for spodumene-type hard-rock lithium extraction—the XiangCNY Lithium Polymetallic Mine Integrated Project in Daoxian County, Hunan Province—was completed and put into operation. The project includes a mining and beneficiation facility with an annual capacity of 5 million tons and a battery-grade lithium carbonate plant with an annual capacity of 30,000 tons. Australia’s Greenbushes Lithium Mine CGP3 project, with a lithium concentrate capacity of 520,000 tons, is scheduled to begin production by the end of 2025. On September 20, the Zabuye Salt Lake Project of Tibet Mining successfully completed a 120-hour functional test and officially started operations, with an annual lithium carbonate production capacity of 12,000 tons. On September 14, Zijin Mining announced that its “Lithium Industry Kexi 3Q Lithium Salt Lake Project,” with an annual lithium carbonate production capacity of 20,000 tons, has officially begun operations in Argentina.

In 2026, the lithium carbonate market is expected to maintain a dual growth trend in both supply and demand, with prices likely to move upward overall. Both the supply side and the demand side are forecast to see year-on-year growth rates of around 30%. As for whether energy storage can drive unexpectedly strong growth in total demand starting from 2026 and beyond, current industry forecasts vary widely, and there is no consensus yet on this point. If we extrapolate from the overall target outlined in the “Special Action Plan for Large-Scale Development of New Energy Storage (2025–2027),” which sets a national installed capacity target of over 180 gigawatts (180 million kilowatts) for new energy storage by 2027, a year-on-year growth rate of approximately 30% could serve as a reasonable starting point for estimating the growth rate of energy storage demand. During periods of price volatility, to cope with fluctuations in lithium prices and ensure steady development, companies across the industrial chain can use futures contracts for hedging based on their production levels, inventory holdings, and other operational conditions, thereby stabilizing raw material procurement costs or locking in product sales profits.Companies with abundant mineral resource reserves, leading-edge technology that continuously innovates, and strong cost-control capabilities are likely to further consolidate their competitive advantages in the course of development. Under the policy guidance aimed at accelerating technological advancement and promoting industrial transformation and upgrading, lithium salt enterprises need to focus on multiple aspects—including technological innovation, green development, and industrial synergy—to enhance their industrial competitiveness and strengthen their resource security as well as their level of industrial chain collaboration.

Recently, downstream demand for lithium batteries has been relatively optimistic, and energy storage continues to enjoy strong growth. The market expects demand in the first quarter of 2026 to remain robust despite it typically being a slow season. However, we cannot rule out the possibility of short-term mismatches caused by a slackening in the power battery sector during the off-season. At the beginning of next year, we’ll need to pay close attention to downstream inventory replenishment needs and the resumption progress of specific lithium resource projects. We should also keep an eye on subsequent changes in policies affecting both energy storage demand and supply-demand dynamics.

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