China's lithium ore prices tracked lithium carbonate lower in mid-May, but spot availability remained tight as large converters pre-stocked supply for the third quarter in advance, keeping inventories at Xinminzhou Port low. While near-term supply stays tight, medium-term signals are improving as Zimbabwe shipments have resumed, and Mineral Resources (MinRes) plans to restart Bald Hill mine by June, potentially adding to the supply pressure.
China's domestic lithium ore prices moved lower in line with lithium carbonate turning bearish in the week ending May 15. On the spot market, large-sized lithium converters took delivery quickly, fixing prices when futures price cut accelerated. Having already secured inventory equivalent of two months of production in advance, large converters have begun locking in ore supply for the third quarter, further tightening spot availability. As a result, lithium ore inventories at Xinminzhou Port, a major port that receives most of China's lithium ore port arrivals, continued to decline, based on Mysteel's data.
Source: Mysteel
Notably, signals of improving medium to long-term supply are gaining strength. On one hand, lithium ore shipments from Zimbabwe have resumed and, allowing for sea freight lead times, are expected to arrive in China from July onward. On the other hand, overseas high-cost mines have confirmed restarts. MinRes has announced it will begin preparations for restarting the Bald Hill lithium mine at the end of May, resume mining in June, and produce first concentrate in July.
While formal shipments from Bald Hill are not expected until early FY2027 (around Q3 2026) and near-term (May-June) lithium ore supply tightness will persist, the restart confirms that current lithium prices have already reached levels that cover the breakeven point for high-cost mines. This sets the stage for greater global supply flexibility from end-2026 onward. Based on Mysteel's data, as of May 13, the 30-day rolling average transaction price for lithium concentrate stood at Yuan 179,500/tonne LCE.
Despite near-term lithium ore tightness, recent lithium carbonate prices have been under multiple pressures, including macro headwinds, policy changes, as well as warehouse receipts.
On the macro front, the broader macro environment has turned weaker, with markets pricing in rising expectations of interest rate hikes, weighing on risk asset valuations.
In addition, though power and energy storage batteries are currently exempt from consumption tax, the industry participants widely expect that such exemption will not be permanent. Yet, even if a consumption tax is introduced, it is likely to be phased in rather than applied in full at once. The overall tax rate is expected to be 4%, with the market anticipating a first-phase rate of 2%.
Meanwhile, the warehouse receipts have grown rapidly, reaching 51,804 lots as of May 18, approaching historical highs. There is potential for further pressure, with receipts expected to rise to 70,000 lots, reinforcing expectations of ample spot lithium carbonate supply.
Still, the lithium carbonate sector remains well supported on the demand side in May, with production schedules for both power and energy storage batteries holding at high levels. Some cathode plants continue to ramp up new capacity. However, recent bearish news has prompted downstream buyers to adopt a more rational procurement strategy, showing a clear preference for buying on dips.
In other words, while lithium carbonate supply remains relatively ample in the face of mounting warehouse receipts and traders' inventories, the industry continues to find a floor from "tight ore supply" and "solid demand", supported by the sustained increase in essential demand. Looking ahead, key factors to watch include the pace of new capacity ramp-ups and the supply stability of upstream iron phosphate, both of which could weigh on the demand resilience.
In summary, the market's core conflict has shifted from a simple supply-demand mismatch to an intense tug-of-war between hard support stemming from near-term lithium ore supply tightness and a soft cap amidst medium-term supply ramp-up expectations.
Looking ahead, despite high warehouse receipts, tight lithium ore supply provides a cost floor over May-June. As long as downstream power and energy storage battery demand continues to grow month-on-month, prices are likely to find strong support near Yuan 180,000/tonne.
In the medium-term spanning July-August, if lithium ore shipment from Zimbabwe arrives in China as scheduled and flows smoothly into the market, the industry is likely to see lithium ore supply turning sufficient. In this case, the cost support would weaken marginally, and the prices could face downward pressure, depending, however, on the strength of peak-season stocking among downstream players.
Written by Aggie Hu, huchenying@mysteel.com
