China's lithium carbonate market experienced a rollercoaster ride in the first half of 2026, marked by a sharp rally, a peak, a rapid correction, and a period of rangebound consolidation. Prices opened the year at Yuan 117,000/tonne, surged to a year-to-date high of Yuan 200,000/tonne in mid-May, and retreated to around Yuan 150,000/tonne by the end of June, trading in a broad range of Yuan 150,000-200,000/tonne through the first six months.
Source: Mysteel
The first-half rally was driven by feedstock supply disruptions and rising downstream production schedules. The correction that followed was triggered by a combination of historically high GFEX warrants which rose above 55,000 lots, restarts at Australian mines, and resumed shipments from Zimbabwe, all of which fueled expectations of improving supply, in addition to slower cathode active material production growth and inventory accumulation downstream. As a result, the pricing narrative shifted from a unilateral supply-shortage story to a two-way tug-of-war between mine-restart expectations and warrants drawdowns.
Looking ahead to the second half, near-term demand resilience is supported by robust energy storage demand and a sharp rise in commercial electric vehicle (EV) penetration. Further out, the market faces incremental supply from overseas mine projects and sustained high import volumes. Prices are expected to trade in a narrower range of Yuan 150,000-180,000/tonne, with lower volatility compared with the first half.
H1 2026 Review
Lithium prices posted strong gains in the first half before giving way to a correction, as a phase-out of export tax rebates brought forward battery demand, while supply-side fears from Zimbabwe's export halt and Jiangxi's licensing issues further tightened sentiment. The rally pushed battery-grade lithium carbonate to Yuan 200,000/tonne by mid-May.
The reversal afterwards was triggered by a record build-up of GFEX warrants, restart signals from Australian mines, and high Chilean import volumes, which pulled prices back to around Yuan 150,000/tonne by end-June. Cost support tracked these moves in tandem, as Australia's 6%Li spodumene concentrate prices CIF China rose from US $1,575/tonne at the start of the year to US $3,075/tonne in mid-May, before easing to US $2,140/tonne in June.
On the supply side, domestic lithium carbonate production totaled 595,000 tonnes in the first half of 2026, up 40.9% year-on-year. By feedstock, spodumene-based output reached 373,000 tonnes (+63.6% YoY), with Sichuan as the main source of growth. Salt lake production contributed 90,500 tonnes (+38.1% YoY), driven by summer output increases in Qinghai. Lepidolite-based output fell 13.8% year-on-year to 76,700 tonnes, weighed down by license renewals in Jiangxi. Recycling contributed 54,500 tonnes (+37.7% YoY). Imports in January-May added up to 153,000 tonnes, up 53.4% year-on-year, with Chile accounting for 62.3% and Argentina for 31.5%.
On the demand side, passenger EV sales remained weak while commercial EV sales strengthened. As of June 14, year-to-date cumulative retail sales stood at 4.039 million units, down 15% year-on-year, while wholesale volumes reached 5.684 million units, up 2% year-on-year. Commercial EV penetration rate surged to 40.1% in May, providing key support. In addition, the average battery capacity per EV reached 68.4 kWh in January-May, up 34.3% year-on-year.
It is worth noticing that the robust passenger EV exports helped offset domestic weakness, and capacity per vehicle also exceeded early-year expectations, keeping power battery demand on a healthy growth trajectory.
In this context, cumulative sales of power and energy storage batteries reached 783.4 GWh in January-May, up 48.5% year-on-year. Of this total, power batteries accounted for 527.9 GWh (+34.9% YoY) and energy storage for 255.5 GWh (+87.7% YoY). Energy storage demand continued to accelerate, with orders already booked through 2027. On the material side, LFP cathode production in January-June totaled 2.737 million tonnes (+70.1% YoY), while ternary cathode output stood at 499,000 tonnes (+46.1% YoY).
H2 2026 Outlook
Looking ahead over the second half, supply will see further increases from spodumene-based production ramp-ups in Sichuan, seasonal production gains in summer in Qinghai, and new recycling lines coming online. The Jianxiawo mine is estimated to resume production in Q3. Australian mine restarts and port arrivals from Zimbabwe starting mid-July will add further supply in Q3 and Q4.
On the demand side, energy storage is expected to remain strong, commercial EVs robust, and passenger EVs recovering modestly. Lithium demand in Q3 is estimated at 488,000 tonnes LCE and Q4 at 543,000 tonnes, bringing second-half demand 25.3% above the first half. July battery production schedules are projected to rise 5-10% month-on-month, with another 5% increase in August. Second-half LFP cathode production is expected to average above 590,000 tonnes per month, underpinning demand resilience.
Imports from Australia and Chile are expected to remain high, with net imports expected at around 30,000-32,000 tonnes LCE per month in the second half, up over 55% for the full year. Monthly inventory drawdown is expected to continue in the second half, with full-year destocking of around 47,000 tonnes LCE.
Taken together, the lithium price momentum depends on whether CAM and battery plant capacity expansions and ramp-ups can provide sufficient demand pull to break through price ceilings in Q3-Q4, while the downside is supported by costs for converters relying on outsourced feedstock and essential purchases.
The second half is likely to remain a tug-of-war between near-term demand strength and medium-term supply ramp-up expectations, with prices expected to trade in a range of Yuan 150,000-180,000/tonne. Strong support is seen at Yuan 150,000/tonne, while resistance above Yuan 180,000/tonne will require a combination of delayed mine restarts, warrants drawdowns, and stronger-than-expected peak-season demand to break through.
In terms of strategic positioning, lithium converters are likely to lock in hedging profits near Yuan 180,000/tonne, while those relying on outsourced feedstock will continue to secure feedstock supply for Q3. Downstream buyers will likely adopt a hand-to-mouth approach at low prices, replenishing to 3-4 weeks of inventory on dips, but avoiding chasing highs. Key variables to watch include the official restart announcement for Jianxiawo, the pace of warrants drawdowns, and the actual demand through the second half.
Written by Aggie Hu, huchenying@mysteel.com
