Lithium ore prices extended declines since May, with lithium carbonate also falling persistently and approaching the Yuan 60,000/t threshold recently. Nevertheless, the downtrend of lithium prices moderated and shifted into narrow-range fluctuations as broad industrial goods prices stabilized.
According to Mysteel, China's lithium carbonate production reached 70,000 tonnes in May, rising 1.7% month-on-month, according to Mysteel survey. The restart of previously overhauled spodumene production lines, as well as the recovery of production among some producers in northern China and Sichuan, contributed to the overall increase in operating rates. Producers in East China without mines boosted production through concentrated feedstock procurement, while seasonal factors pushed Qinghai's production slightly higher.
Source: Mysteel
Nevertheless, the operating rates in the recycling sector remained constrained due to persistent cost inversion. About 85% of hydrometallurgical plants using LFP (lithium iron phosphate) scrap as feedstock have entered maintenance or shutdown phases and have not resumed production post-maintenance.
Looking ahead to June, China's lithium carbonate production is forecasted at 71,700 tonnes, up 2.4% month-on-month. Production in Qinghai is expected to remain stable, while capacity utilization in Jiangxi is likely to improve. As raw material prices begin to stabilize, producers without mines are under less cost pressure. However, the recycling sector is still facing weak demand, prompting some plants to shift to carbonate processing to maintain operational continuity. Overall, operating rates in the recycling segment are expected to remain at relatively low levels.
From the raw material side, lithium carbonate production from spodumene edged higher in May as producers resumed full operations, though some major players reduced volumes under price pressure. Tolling plants in northern China lifted operating rates after miners completed hedging activities.
For the lithium carbonate production from lepidolite, only integrated producers with captive mines maintained operations without cutback plans amid cost pressures. The production from recycled materials has steadily declined since early 2025, and producers sustained low operating rates due to compressed margins from falling monthly average lithium prices. The production operations from brine lakes sustained stability with lower costs, projecting marginal increases in coming months.
Source: Mysteel
According to Chilean customs, lithium carbonate exports from Chile totaled 14,141 tonnes in May, down 35.04% month-on-month (MoM) and 37% year-on-year (YoY). Shipments to China fell to 9,655 tonnes, declining 37.89% MoM and 46.48% YoY. The significant reduction stemmed from high inventories and weak downstream demand among Chinese enterprises, resulting in lower shipment volumes.
In May, the production of China's LFP reached 287,900 tonnes, an increase of 7.15% compared to April. In early May, the consumption situation in the automotive market was good. In late May, with the easing of tariff issues, battery cell factories rushed to export, which led to a recovery in energy storage orders, and some enterprises saw a significant increase in production.
Source: Mysteel
It is expected that the LFP production in June will be 294,600 tonnes. The power market will weaken slightly in June, but the demand for energy storage exports under the reduction of tariffs will be strong, and the overall orders may rise. However, some of the incremental production of LFP enterprises comes from the transfer of orders between suppliers, coupled with the destocking actions of both LFP factories and battery cell factories. It is expected that the incremental production of LFP in June will be limited.
Source: Mysteel
Mysteel's tracking on lithium carbonate inventory indicated basically balanced supply-demand dynamics in June, with inventories projected to accumulate by 389 tonnes. The marketable lithium carbonate inventory (the lithium carbonate stocks held by the refineries and traders that are willing to sell) surged to 38,138 tonnes this week, a record high reflecting a 3,120-tonne WoW increase. This resulted primarily from upstream producers releasing priced inventories following futures rebounds, though weak downstream demand constrained sales and gradually amplified inventory pressure.
Spot market transactions between traders and downstream buyers continued shrinking recently, with most market participants maintaining a wait-and-see approach amid bearish outlooks.
In summary, while some smelters resumed production in June, overseas shipment data suggested potential import reductions. Coupled with stable downstream material production schedules, the market is expected to approach a tight balance. Market participants are advised to monitor lithium mine operations closely, particularly whether price declines approaching overseas miners' cost thresholds would trigger production cuts.
Written by Cora Ji, jiruyan@mysteel.com
