It is expected that China's lithium carbonate market will see a relatively balanced supply and demand dynamics through the first quarter of 2026, with the February market potentially experiencing a slightly inventory accumulation before the demand further resumes in March, based on Mysteel's survey.
Since the end of January 2026, a significant pullback in lithium carbonate prices was observed with a reduction of approximately 30% following the peaking of precious metals prices and enhanced efforts of Guangzhou Future Exchange (GFEX) trying to cool down overwhelming speculative activities.
On the spot market, the downstream cathode plants and battery producers engaged in substantial bargain-hunting restocking during the price cut. And the recent weekly spot transaction volume also hit a record high based on Mysteel's sampled traders, which reported drastically reduced inventories. In the short term, this has resulted in a major shift in the inventory structure of lithium carbonate across the industry chain, with market players adjusting their sentiment.
On the supply side, China's lithium carbonate is estimated at around 88,300 tonnes in February based on Mysteel's survey of refineries' production scheduling, down around 8.2% from 96,200 tonnes in January primarily due to refinery overhaul during the Chinese New Year (CNY) holiday as well as reduced calendar days in February.
From the perspective of raw materials, Mysteel's survey indicated that, the spodumene-based lithium carbonate production in February is expected to contract from January, partly due to scheduled maintenance at some large-scale plants in Sichuan, Jiangxi, and Xinjiang during the holiday period, with Sichuan showing the most pronounced decrease. Nevertheless, some newly commissioned production lines are in the ramp-up stage with ample lithium ore supply.
Among lepidolite projects, some lepidolite-based producers in Jiangxi are undergoing facility upgrades during the CNY holiday, while others have restarted production by taking on tolling orders, leading to higher operating rates. Overall, the overall change is not significant.
The lithium carbonate production from recycled materials will likely remain little changed due to sustained high lithium prices. Production from salt lake resources, experiencing minimal weather disruptions and fewer calendar days in February, is anticipated to show a slight decline, which falls within normal seasonal fluctuations.
In addition, based on the export data from Chilean customs, the lithium carbonate and lithium sulfate exports in January showed significant increases. According to Mysteel's research, this is attributed to seasonal early shipments and is not expected to affect the full-year supply outlook.
On the demand end, China's lithium iron phosphate (LFP) production in February 2026 is projected to slightly fall to 383,200 tonnes, representing a month-on-month decline of 5.48%. The reduction in February is primarily influenced by factors such as the CNY holiday and adjustments to production lines by enterprises. And the cathode plants' orderbook has been robust against the traditional seasonal lull.
Taken together, China's lithium carbonate market is expected to see an inventory buildup of around 2,453 tonnes in February, primarily due to higher imports of lithium sulfate and a seasonal reduction on the demand end.
Concerning GFEX, the number of warehouse receipts has been steadily increasing since the concentrated cancellations in November. Currently, with spot-futures basis showing significant volatility, traders have found some profitability in delivering the futures contracts. However, against the backdrop of continuous inventory drawdown, the players are increasingly less interested in registering warehouse receipts. Moreover, some refineries hold strong expectations over future lithium prices. Therefore, if spot-futures basis continues to strengthen, there is no expectation for a significant increase in warehouse receipt volumes.
Regarding the marketable lithium carbonate inventory held by traders and refineries, the inventory among 43 sampled entities recorded 28,220 tonnes in the week ending February 6, a decrease of 16,600 tonnes week-on-week, which represents the largest weekly decline on record.
Recently, due to a substantial drop in lithium carbonate prices, downstream battery manufacturers and cathode plants have been actively purchasing and restocking, leading to a reduction of approximately 50% in marketable lithium carbonate inventories from the historical highs seen at the end of December.
Going forward, it is essential to monitor the downstream inventory digestion capacity, the sustainability of spot purchases after the CNY holiday, and whether spot-futures basis shows signs of strengthening as lithium prices decline.
Looking ahead, in the short term, the lithium carbonate market is likely to resume a tight supply-demand balance through February. With downstream finishing pre-holiday stockpiling, there has been few significant contradictions or structural mismatches on the spot market. And the lithium prices are anticipated to consolidate and seek a bottom.
From a medium-term perspective, driven by relatively optimistic demand expectations for March, a slight overall inventory drawdown is projected for the first quarter. And Mysteel maintains the view of the market hovering around a tight balance for the full year, while monitoring will continue for potential seasonal supply-demand mismatches in the rest of the year.
Source: Mysteel
Written by Aggie Hu, huchenying@mysteel.com
