Mysteel's tracking of the shipping fixture suggested that the port arrivals of Australia's spodumene in China have picked up in April, and spot inventories held by traders have stabilized, with no further declines observed for now. In Zimbabwe, the major mining companies have obtained their export quotas, though physical shipments are yet to begin.
Meanwhile, the procurement pace remains divided among industrial players. Some lithium refineries have already secured sufficient feedstock for the second quarter, while certain large-scale ones still face supply gaps and are actively seeking cargoes in the market.
With some traders now quoting against GFEX LC 2609 from LC 2605, the wide spread between May and September contracts has kept the lithium refineries and traders a in a tug-of-war over processing charges. The refineries generally believe that current quotations against the September contract have excessively compressed processing charges, leaving them reluctant to purchase.
Overall, there is currently little room for processing charges to further rise, but the space for further contraction is also limited. That is, the processing charges are expected to remain in a stalemate in the short period.
For lithium carbonate, structural inventory shifts continue across the value chain.
The lithium carbonate inventories modestly accumulated in the session ending April 17, with both refineries and traders' stocks edging up, while downstream players' inventories fell slightly. Spot lithium carbonate transactions have remained subdued primarily because the downstream buyers, well-stocked and in no rush to purchase, only step in to buy when futures prices fall sharply.
The wide spread between GFEX May and September futures contracts has led to divergent bids and offers between refineries and traders, creating market confusion and a state of strategic jockeying with no clear consensus on procurement strategy. Notably, the pace of warrants registration has accelerated. Deliverable volumes against the May contract are expected to approach 40,000 lots by the end of April, potentially adding supply pressure to both the near-month contract and the spot market.
The demand outlook remains optimistic. Battery cell production scheduling for the second quarter rises compared with the first quarter. And the electric passenger vehicle sales are expected to pick up after major auto exhibitions in late April. Demand from non-power sectors such as energy storage also remains robust. In summary, there is no material bearish factors emerging on the demand side.
That said, end-user procurement has slowed somewhat, with some projects postponed pending economic reassessments. Downstream companies have built inventories to cover 3-4 weeks of consumption and will likely become more cautious in subsequent purchases. Market sentiment remains positive, with broad expectations that industrial demand is entering a new cycle.
Once inventories are effectively drawn down in May-June, the lithium prices are expected to embark on a new round of gains.
Looking ahead over the second quarter, market focus will be on the pace of spot inventory digestion.
Constrained by accumulating warehouse receipts and relatively high downstream inventories, prices are unlikely to stage a sharp, one-sided rally. Instead, a volatile upward trend is expected, with monthly averages moving gradually higher. However, gains are likely to remain measured.
As lithium carbonate prices approach key psychological and technical levels of around Yuan 180,000/tonne, the risk of a pullback increases, driven by tighter exchange oversight and profit-taking by speculative funds.
The medium-term trend, on the other hand, is subject to the successful translation of bullish expectations into strong reality. The traditional peak season in late Q3 could drive a more sustained upward move in lithium carbonate prices should the destocking proceed smoothly in Q2, with downstream inventories drawn down to low levels and end-user consumption proving robust.
Key risks to monitor include supply uncertainty from the delayed restart of CATL's production and slower-than-expected progress on Zimbabwe shipments; demand-side risks, particularly whether downstream orders materialize and whether high prices curb consumption; and market-related risks, as potential extreme volatility in the futures market, combined with elevated open interest, could invite regulatory scrutiny, especially during sharp price rallies.
Written by Aggie Hu, huchenying@mysteel.com
Join Mysteel's April 30 webinar to explore whether supply disruptions will drive the next leg higher for lithium and nickel markets in Q2 2026.
https://www.mysteel.net/event-listings/100067-q2-2026-lithium-and-nickel-will-supply-disruptions-fuel-further-price-hikes
