The most-traded GFEX lithium carbonate futures contract hit the daily limit down on March 3, 2026, with LC2605 closing the day session at Yuan 150,860 /tonne, with a settlement price of Yuan 157,560/tonne, an intraday loss of 12.99%. In addition, the open interest decreased by 38,732 lots. According to Mysteel's assessment, China's battery-grade lithium carbonate reported Yuan 159,700/tonne on the same day, down Yuan 14,150/tonne from the previous day.
The slumping lithium price today was primarily driven by rising risk aversion needs, with funds flowing out of the new energy sector and into safe-haven assets such as gold. Meanwhile, market expectations that a blockade of the Strait of Hormuz could lead to a surge in shipping costs and impact the installation progress of energy storage projects in the Middle East.
Current market expectations suggest that potential wartime disruptions could delay energy storage installation progress by 2-3 months in the short term, leading to a projected downward revision of Middle East energy storage battery demand by approximately 15 GWh for 2026.
Based on statistics of energy storage projects in the Middle East in 2025, Chinese enterprises have secured a total of 42 GWh orders in the region, including orders for CATL, BYD, Hithium, and Desay Battery.
Nevertheless, no substantial changes have occurred on the fundamentals. According to Mysteel's survey of sampled traders, the total transaction volume of lithium carbonate recorded 7,780 tonnes on March 3, with 7,480 tonnes happened with downstream buyers within a trading range of Yuan 150,800-163,000/tonne. And the majority of the transactions occurred near the lower end of the price range, indicating downstream players' bargain hunting.
In the short term, the lithium carbonate price volatility has intensified influenced by sentiment and capital games. However, the long-term anticipation for growing electric vehicles and energy storage market remains unchanged.
Risks:
1. Continued escalation of geopolitical conflicts in the Middle East may heighten global risk aversion and exacerbate financial market volatility.
2. A potential blockade of the Strait of Hormuz could disrupt global energy supplies, push oil prices higher, and consequently impact global inflation expectations.
3. The installation progress of energy storage projects in the Middle East could be affected by the conflict, potentially leading to lower-than-expected energy storage demand in 2026.
Written by Aggie Hu, huchenying@mysteel.com
