Looking back on the first half of 2025, China's lithium carbonate (LC) spot prices constantly created new lows and dropped below Yuan 60,000/tonne once partly due to the failed traditional seasonal high and the lack of support on the fundamentals, according to Mysteel's analysis.
Source: Mysteel
In detail, the LC market extended the animation from end-2024 and the downstream players actively built stocks ahead of the Chinese New Year (CNY) holiday which kicked off around the end of January 2025, resulting in robust spot transactions on the market.
However, the market players started to hold different stances post the CNY holiday.
Some were bullish as the demand in the cathode sector was more resilient than expected, which beat the expectations that the demand would weaken significantly post the holiday. Instead, the cathode factories maintained stable procurement on the spot market.
While the market was yet to resume normal operations post the CNY holiday, there came the news that several top-tier lithium refineries would soon restart, aggravating the concerns on oversupply.
In this case, the spot prices were soft against the traditional seasonal high in March and moved in a narrow range. With the US starting the tariff hike in April, the LC prices dropped further and touched the previous support at Yuan 70,000/tonne.
During this period, the market players were wait-and-see with the mixture of bulls and bears, including the extremely uncertain tariff policy outlook and potential production curtailment on the supply side.
However, on the fundamentals, the lithium ore prices were persistently soft, and the downstream demand failed to show palpable improvement. In this case, the LC spot prices dived after dropped below the support of Yuan 70,000/tonne, and the futures contract price also created a new low since its listing.
Nevertheless, the LC prices finally started to rally around end-June thanks to easing tariff concerns and the government commitment to addressing overcapacity.
Looking ahead, the LC spot prices may find some support in the third quarter, potentially leading to a modest rebound. Prolonged low prices have already pushed some high-cost capacities - including mining and smelting operations - into losses. If the miners are forced to cut or halt the production, the overall market supply could contract in the short term. Additionally, potential positive macro policies or improved market sentiment may provide temporary support for a price rebound.
However, any recovery will remain constrained by high inventory pressure and weak end-demand. The substantial accumulated visible and hidden inventories from the first half of the year will take considerable time to digest, creating persistent pressure. Meanwhile, the demand growth in key downstream sectors such as electric vehicles and energy storage remains slow, failing to deliver strong, sustained upward momentum for prices.
As a result, any price rebound in Q3 is likely to be short-lived and limited in magnitude, capped by both high inventories and soft demand.
Entering the fourth quarter, the market will likely return to the fundamentals with persistent oversupply as the core challenge. New capacities coming on stream are expected to continue outpacing the demand growth, making a supply-demand rebalancing unlikely.
With intensified pressure, the overall price trajectory will shift lower, testing the bottom range of the cost curve - particularly testing the breakeven points of high-cost mines and salt lake operations. A sustainable market bottom will only emerge upon clear signals of capacity phase-out, marked by substantial production cuts or shutdowns at major high-cost mining assets.
In summary, the structural surplus dictates a lower annual price floor, with the cost curve providing baseline support. However, hedging activities will cap the upside potential. The LC prices are projected to exhibit weak volatility within the Yuan 56,000-68,000/tonne range for the second half, with a downward bias.
Written by Aggie Hu, huchenying@mysteel.com
