Since late February 2026, the outbreak of conflict in the Middle East has raised concerns over potential delays in overseas energy storage systems installations. Heightened risk aversion has further triggered a sharp pullback in lithium carbonate prices from around Yuan 180,000/tonne, ending the post-holiday rally amidst routine stockpiling and putting up a phase of broad volatility.
Mirroring previous corrections, downstream buyers have stepped in to restock at lower levels, keeping spot market demand relatively resilient. For now, persistent uncertainties on both the supply and demand fronts in China and abroad have left the market without a clear near-term direction.
On the fundamentals, Mysteel's survey indicated that China's lithium carbonate production is scheduled at around 106,700 tonnes in March, rising 29.4% from February, absent of holiday impacts.
After February's holiday-related disruptions and shorter month, March brings a sharp rebound in spodumene-based lithium carbonate production, especially in Sichuan, Jiangxi, and Xinjiang, as plants ramp up operations. Tolling producers, backed by strong order books, are largely running at high capacity utilization rates. In contrast, the lepidolite-based converters hold steady, constrained by tight ore availability.
Recycled lithium carbonate production has also remained stable, underpinned by firm lithium prices on the whole. Meanwhile, salt lake operations, largely insulated from seasonal weather swings, are set for a slight uptick in March, reflecting normal variability due to additional calendar days in March compared with February.
With regards to overseas supply, Chilean customs data for February 2026 shows lithium carbonate exports surging to 26,852 tonnes (+17% MoM, +84% YoY), with 22,381 tonnes destined for China. Lithium sulfate exports to China reached 12,107 tonnes (-56% MoM, +17% YoY).
The sharp rise in February carbonate shipments involve certain inventory from Chilean producers, and does not alter full-year production expectations. Monthly shipment volumes are expected to moderate in the coming months.
On the demand end, China's lithium iron phosphate (LFP) production is forecast to reach 446,900 tonnes in March 2026, up 15.5% month-on-month. Post-holiday production is normalizing, with most manufacturers expected to run at full capacity. Rising shipments from facilities in Sichuan and Hubei are poised to push March industry output to a record high.
Taken together, March production scheduling of lithium carbonate and LFP points to a modest inventory build of 638 tonnes, with monthly lithium carbonate imports expected to stay strong and higher operating rates at lithium sulfate tolling plants pushing total supply to a new high.
In addition, warehouse receipts have held broadly steady recently, with marginal fluctuations reflecting slower post-holiday restocking by traders. The lithium converters mostly held high anticipations of lithium prices, limiting spot availability and moderating the pace of futures deliveries. GFEX's data also suggests limited new receipt applications. The key variable ahead will be the timing and pace of converters' cargo release.
The marketable lithium carbonate inventories among 43 surveyed traders and converters edged up to 33,520 tonnes last Friday March 6, a net increase of 1,860 tonnes from the previous session. The modest post-holiday rebound reflects gradual releases from lithium converters. Despite a brief pickup in downstream buying during Tuesday's sharp downturn in lithium price, purchasing activity has cooled as futures price volatility narrowed, leaving the marketable inventories slightly higher.
In conclusion, the near-term spot market will likely see a moderating inventory drawdown pace, settling into a tight supply-demand balance. And there are few structural mismatches in spot inventories since the downstream buyers have been well-stocked.
Still, the supply-side tightness persists, reinforced by policy uncertainties in Zimbabwe and elsewhere. Demand traction will hinge on whether March electric vehicle sales deliver a convincing rebound. For now, lithium carbonate prices are expected to trade in a Yuan 140,000–170,000/tonne range.
Medium-term, Mysteel maintains a cautiously bullish stance, underpinned by sustained supply constraints and visible incremental demand from energy storage and BYD's charging infrastructure rollout. Key variables to watch include Zimbabwe's mining policy evolution, validation of domestic consumption expectations, and macro signals that could shift the broader landscape.
Source: Mysteel
Written by Aggie Hu, huchenying@mysteel.com
