Lithium Market Dynamics: Supply-Demand Tensions and Evolving Price Trends Amidst Global and Domestic Shifts

Since November, driven by strong demand from the energy storage sector, downstream material manufacturers have been operating at historically high utilization rates, leading to a widening monthly supply gap for lithium carbonate. Prices surged significantly, with futures rising from around Yuan 80,000/t to over Yuan 100,000/t, marking substantial volatility. However, recent signs of slowing weekly destocking, coupled with rumors of the potential reopening of CATL, have slightly tempered bullish sentiment, and prices have re-entered a range-bound consolidation phase.

Background:

Supply Side:
In November 2025, the production of lithium carbonate reached 93,800 tonnes, marking a month-on-month increase of 5.1%, according to Mysteel's data. During the month, integrated large-scale producers in Jiangxi Province and a few lepidolite production lines maintained high operating rates through tolling arrangements, while some manufacturers in Sichuan Province reduced output due to production line maintenance. Meanwhile, most other producers maintained stable operations. In East and North China, plant operating rates varied with both increases and decreases. Production in Qinghai remained stable, while new production lines in Xinjiang continued ramping up. Additionally, some mainstream producers in the recycling sector reduced output due to technical upgrades or maintenance shutdowns. Overall, domestic supply in November continued to show an upward trend.

In December 2025, the domestic scheduled production of lithium carbonate is projected to be 98,400 tonnes, representing an increase of 4.9% MoM. Integrated large-scale producers in Jiangxi Province are expected to maintain stable operations, while lepidolite-based lithium producers will continue actively undertaking tolling orders and sourcing lepidolite ores externally for production. Some manufacturers in Sichuan Province have resumed production following maintenance, leading to incremental output. At the same time, some producers in Qinghai are anticipated to slightly reduce output due to seasonal factors, while other capacities remain stable. In the recycling sector, automotive plant scrap is expected to increase, prompting higher scheduled production for some enterprises in December in line with the rise in scrap availability. Overall, domestic supply of lithium carbonate is projected to maintain its upward trend in December.

By Raw Material Type

The production from spodumene-based production lines in December is expected to continue its slight increase from the October level, marking the eighth consecutive month of sequential growth. The rise in the output stems from two factors. Firstly, major producers in Sichuan Province have resumed operations after completing maintenance in November, with operating rates gradually increasing in December. Secondly, fluctuations in tolling orders at some manufacturers in North China have contributed to a minor uptick in production.

As for projects, lithium carbonate output from Jiangxi's lepidolite resources has seen a modest increase, supported by CATL slightly higher operating rates.

Recycled material-based lithium carbonate production has been on a steady decline since the beginning of 2025. However, operating rates have recently improved due to persistently high spot and monthly average prices. Salt lake-based production remains largely unaffected by weather disruptions, with most facilities operating at full capacity. Individual newly production lines are gradually ramping up output and are expected to provide additional increments in the coming months.

Exports:

According to data released by Chilean customs, Chile's total lithium carbonate exports in November amounted to 17,964 tonnes, representing a month-on-month decrease of 27.47% and a year-on-year decrease of 13.21%. Among these exports, shipments to China totaled 14,693 tonnes, reflecting declines of 9.36% MoM and 13.25% YoY respectively.

Chilean customs data also show that lithium sulfate exports to China in November reached 10,132 tonnes, marking a month-on-month increase of 493.2% and a year-on-year decrease of 54.1%.

While Chile's lithium carbonate shipments recorded a slight month-on-month decline in November, the volume of lithium sulfate shipments was substantial. It is anticipated that China's lithium carbonate imports will remain at a high level in November.

Demand Side:

In November 2025, domestic lithium iron phosphate (LFP) production reached a record high of 407,800 tonnes, marking a month-on-month increase of 3.06%. Driven by strong demand from both the power battery and energy storage sectors, overall industry operating rates continued to rise, with the majority of producers operating at full capacity.

LFP production in December is projected to be 403,100 tonnes, reflecting a decrease of 1.15% MoM. In terms of production scheduling, most producers are expected to maintain stable output, while others show mixed trends. Production reductions are primarily due to phased adjustments in power battery orders, year-end inventory destocking, and production line maintenance. Increases, on the other hand, are mainly supported by the steady ramp-up of new production capacities in Hubei Province, providing a cushion to overall supply.

Monthly Li2CO3 Balance Forecast for December

Based on supply and demand analysis, December is expected to see an increase in supply and a decrease in demand, with the pace of inventory destocking likely to slow compared to November.

1).Supply-Demand Balance

Based on Mysteel's production scheduling surveys, a drawdown of 4,709 tonnes is projected for December. While demand from the energy storage sector remains strong with a slight increase, the power battery segment shows slight weakness due to seasonal fluctuations. On the supply side, production remains at elevated levels, with no significant reductions reported among manufacturers.

2).Warehouse Receipts

Following the concentrated cancellation of warehouse receipts at the end of November, incremental inventory in the short term is largely concentrated in manufacturers' warehouses. According to warehousing data, several thousand tonnes remain pending for warehousing, but the volume is limited, and no significant increase in warehouse receipts is expected in the near term. Future developments will depend on tracking basis trends closely.

3).Spot Circulation

Last week, the salable inventory among 42 sampled entities amounted to 45,620 tonnes, a decrease of 2,980 tonnes compared to the previous week. As prices declined recently, salable inventory slightly decreased, and spot transactions in trade channels expanded. After six consecutive weeks of inventory accumulation, circulation-side inventory has shown its first turning point. Subsequent monitoring will focus on downstream purchasing intensity and whether the basis strengthens alongside price declines.

4).Spot Transactions

Spot trading activity picked up last week as prices approached to the level of Yuan 90,000/t, with downstream buyers placing concentrated orders and subsequently settling at fixed prices. However, as prices rebounded, transaction activity weakened significantly. The spot market is expected to remain in a stalemate in the short term, with downstream buyers showing no clear intention for substantial restocking, leading to intensified bargaining between buyers and sellers.

Conclusion:

Looking ahead, the pace of monthly destocking is expected to weaken in the short term, raising concerns over whether production schedules for material manufacturers in January 2026 will significantly decline. While some downstream purchasing may occur near Yuan 90,000/t, the scale remains limited.

From a medium-term perspective, if CATL resumes production, the supply-demand balance could shift from destocking to inventory accumulation. Downstream demand in January will thus serve as a critical market anchor.

Edited by Cassie Li, lixiangying@mysteel.com