China's lithium carbonate prices have remained rangebound. Although market participants generally expect continued inventory drawdown in May-June, current destocking has yet to materialize as downstream players have slowed procurement, capping any substantial upside.
On the raw material end, the spodumene shipments from Australia saw a modest increase of 7,000 tonnes in the session ending April 19 compared with the previous week, while marketable ore inventories held by domestic traders remained largely stable. Meanwhile, the traders' total lithium ore inventories edged down slightly, with some previously sold cargoes recently picked up by converters.
In Zimbabwe, Huayou Cobalt's first batch of lithium sulfate has been shipped back to China. While other companies have obtained export quotas, actual shipment progress of lithium ore remains slow, and arrival timelines in China are still unclear. Therefore, a modest raw material supply gap is expected to persist through June-July.
On the spot market, the lithium converters, especially those with sufficient in-plant stocks, stood on the sidelines as spot lithium ore basis and lithium carbonate prices were both at elevated levels. Yet, some converters are still actively seeking prices in the market to replenish inventory as their prior stocks have been drawn down.
While players now generally quote against the GFEX September futures contract, lithium converters have criticized sellers for excessively eroding processing margins given the wide spread between the May and September contracts, and have shown little willingness to purchase. The tug-of-war over processing margins has reached an impasse.
In the near term, processing margins for lithium ore have neither upward momentum nor room for further compression. This stalemate is likely to continue until either a significant move in lithium carbonate prices or a change in overseas ore arrival pace.
When it comes to the lithium carbonate spot market, the spot transactions slightly picked up in the session ending April 24, with downstream players building stocks routinely approaching month-end restocking. However, transactions primarily adopted a back-pricing method, with poor acceptance of current absolute price levels.
A good news is that both the price expectations of lithium salt producers and the target levels of downstream buyers have risen. The market is broadly optimistic about price trends in May and June. With basis holding steady, the pace of warrants registration continues to accelerate.
Downstream, the long-term demand expectations remain positive. Major battery cell manufacturers have continued to revise upward their production schedules for the second quarter. Driven by large-scale auto exhibitions in late April, retail foot traffic and orders for electric passenger vehicles have shown signs of recovery.
Demand in the energy storage battery sector remains strong, with no order cancellations yet observed at the end-user level due to rising lithium carbonate prices.
That said, near-term procurement has slowed noticeably. Some small and medium-scale projects have been delayed due to cost evaluations and funding pressures. Downstream cathode plants now hold roughly 3-4 weeks of raw material inventory and have adopted a more cautious procurement strategy, primarily drawing down existing stocks.
Nonetheless, with bullish long-term outlook still in place, it is broadly expected that once end-user consumption picks up in May-June and effectively absorbs current inventory, lithium prices will gain new upward momentum.
In summary, the core market tension remains between strong expectations and soft reality. While spot lithium ore supply is tight, the near-term lithium carbonate contract is pressured by accumulating warehouse receipts. Unlike the market late last year, downstream producers have largely priced in an expected Q2 price increase and have built more ample inventories relative to the end of last year. In other words, the recent market is relatively balanced, failing to provide strong momentum for lithium carbonate prices to sustain the uptrend.
Whether a medium-term trend can be established depends on the pace of Q2 destocking and spot market strength. The market could see a more solid upward move if downstream production schedules continue to grow month-on-month, industrial chain inventories are steadily drawn down, and lithium carbonate spot basis strengthens.
Key risks include supply uncertainties, such as the uncertain restart of Jianxiawo mine and potential delays in Zimbabwe lithium shipments, along with demand-side questions around sustained month-on-month production growth and the risk that higher lithium carbonate prices could dampen end-user battery demand.
Market risks also loom large, with massive futures open interest leaving prices highly sensitive to news flow and prone to sharp swings, while potential exchange risk warnings warrant close attention.
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
