Since November, driven substantially by energy storage demand, operating rates at lithium-ion battery cathode active materials plants have reached historic highs. The monthly supply gap has continued to widen, leading to a sharp increase in lithium carbonate prices.
Coupled with some bullish expectations for lithium demand in 2026, the lithium carbonate futures prices surged from Yuan 80,000/tonne all the way to Yuan 100,000/tonne, showing significant volatility. During this period, the heated market conditions continuously attracted more capital to participate in the futures market, and market expectations for next year's demand have also been rising.
In contrast, the spot market has been quieter compared to the active trading in the futures market.
Source: Mysteel daily data collection, converted to weekly data
Based on Mysteel's daily surveys of sampled traders, spot purchases of lithium carbonate by downstream cathode plants and battery manufacturers weakened significantly in November compared to October. As futures prices recently approached Yuan 100,000/tonne, spot sales by traders became even poorer. Even nearing the routine stockpiling cycle by month-end, the downstream procurement remained slow, with buyers considering futures prices high. Consequently, the daily transaction volumes were often only a few hundred tonnes for most of the recent period. Looking back at daily data for November, transactions reaching several thousand tonnes were only seen on a few days with significant price drops.
According to Mysteel's weekly inventory data for sampled traders, inventory accumulation in the trading sector was evident in November, with total inventory among sampled traders hitting a new record high in the week ending November 28.
The main reasons are twofold: 1) High futures prices and weakening spot-futures spread prompted lithium refineries to actively sell to traders, who rapidly replenished their stocks. 2) Downstream procurement was slow, leaving many traders with very few transactions throughout the month and resulting in poor overall trading.
Overall, a divergence exists between the current lithium carbonate spot market and the futures market. Spot market is increasingly lull, and it is anticipated that the standoff between downstream cathode plants and the futures market will intensify. Furthermore, if traders' inventory continues to build up and the spot-futures spread weakens, the cost-effectiveness of direct delivery into futures exchange warehouses from the spot market increases. This could lead to a rapid rise in the number of warehouse receipts in December.
Following the sustained rise in lithium carbonate prices since November, lithium ore prices have also increased rapidly. This has significantly expanded sales profits for mainstream overseas miners, boosting their willingness to sell. In addition, the increase in lithium carbonate prices has boosted the production scheduling, accompanied by rising raw material consumption.
Currently, the hiking lithium carbonate prices have raised the lithium ore offers from miners and traders, continuously squeezing the processing margins of lithium refineries. This has kept the processing charges for producing lithium carbonate from spodumene concentrate persistently suppressed around Yuan 19,000/tonne.
On the spot market, available lithium ore stocks are gradually accumulating at the lithium refineries. Based on Mysteel's surveys of lithium ore inventories at lithium refineries that reply on outsourced lithium ore, both the in-plant inventory and in-transit inventory held by these plants increased significantly in November, reaching record highs since the inception of Mysteel's statistics.
Source: Mysteel
Although the cost of purchasing ore has risen for lithium refineries given the current high lithium carbonate prices, they can utilize far-month hedging strategies to secure profits. Once profits are locked in, these plants simply need to produce and deliver normally, hence their demand for purchasing ore remains robust.
Overall, the currently available lithium ore spots are primarily accumulated in the hands of lithium refineries that rely on outsourced lithium ore. These plants continuously buy ore, produce, and hedge to lock in profits for future production scheduling. Specially, some have already secured their lithium salt production for the first quarter of 2026. Therefore, the lithium carbonate production is expected to remain high in the short term.
Written by Aggie Hu, huchenying@mysteel.com
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