Weekly Lithium Carbonate Update: V-Shaped Rebound, Policy-Driven Selloff, and Supply-Demand Balance (Week Ended July 27)

 

I. Lithium Ore: Ore Prices Under Pressure, Supply Mix Continues to Diverge

Lithium ore prices fluctuated with a weak bias, and Australian spodumene CIF (6%) edged lower. As of July 24, the 30-day rolling average transaction price for lithium carbonate produced from externally sourced ore stood at Yuan 153,545/tonne. On the inventory front, trader inventories were 90,000 tonnes (continuing to decline), while port physical inventories were approximately 260,000 tonnes (rebounding moderately from low levels).

 

Large lithium salt plants have continued to stockpile raw materials for Q3, with some already locking in October shipments. Given limited incremental lithium ore supply, some producers face weaker procurement competitiveness. Zimbabwean shipments remain constrained by Beira port capacity, and August lithium carbonate production flexibility is expected to be limited. Australian ore shipments in July declined notably. In Q3, sustained attention should be paid to the pace of mine capacity ramp-up and the arrival efficiency of Zimbabwean lithium ore. Current expectations point to still-limited incremental supply in Q3.

 

II. Lithium Salt: Consumption Tax Shock Dominated Weekly Trends, Prices Stabilized After Breakdown

On July 17, three government departments jointly issued a notice clarifying that, effective September 1, lithium-ion batteries would be subject to a 2% consumption tax (rising to 4% in 2027). The "long-term cost uplift & downward revision of demand discounting" effect was fully priced in on Monday, July 20. Following the announcement, spot prices fell by more than Yuan 2,500/tonne in a single day, with battery-grade lithium carbonate quickly breaking below the Yuan 150,000/tonne threshold, and the main contract LC2609 dropping below Yuan 140,000/tonne to Yuan 136,800/tonne on Tuesday. From midweek onward, short covering, downstream restocking at prices below Yuan 140,000/tonne, and the normalization of futures-spot basis helped spot prices stabilize at Yuan 144,000–145,000/tonne. The price spread between battery-grade and industrial-grade lithium carbonate held steady at Yuan 3,000/tonne. Downstream buyers continued to procure on rigid demand, with long-term agreements and customer-supplied coverage mainly covering August requirements, while spot gap purchases are planned to be completed by mid-August.

 

III. Supply-Demand Production Scheduling: Marginal Output Contraction, Demand Resilience and Sustainability of Destocking Await Confirmation

Supply: China's lithium carbonate production scheduling decreased by 2.0% month-on-month in July, with the spodumene route under dual pressure from maintenance shutdowns and delayed Zimbabwean arrivals. June imports were 25,900 tonnes (down 31.1% month-on-month); Chile exported 15,100 tonnes to China (up 11.0% MoM and 47.6% YoY).

 

Demand: China's LFP production scheduling increased by 4.68% month-on-month in July. Energy storage orders remain at full capacity, with leading producers booked through Q2 2027. Power battery demand is steady. The consumption tax has prompted battery manufacturers to issue price adjustment letters to pass costs downstream, though no rush stockpiling has been triggered so far.

 

Overall: The monthly balance continues to show destocking, but whether the pace of destocking can be sustained and whether peak-season demand materializes as expected require ongoing monitoring.

 

IV. Outlook: Two-Sided Tug-of-War Dominates, Focus on Policy Implementation and Peak-Season Confirmation

In the near term, spot supply remains relatively loose, but demand is fairly strong. The monthly balance maintains a substantial destocking pattern, with the estimated destocking of  July  and August reaching 22,000 tonnes and 15,000 tonnes respectively. On the downside, prices find support around Yuan 120,000/tonne (corresponding to the extraction cost from lithium slag), while on the upside, prices face resistance around Yuan 153,000/tonne (corresponding to the 30-day rolling average transaction price for outsourcing ore-based lithium salt producers). A trend reversal still awaits validation of traditional peak-season demand during August–September, as well as the gradual digestion of lithium carbonate spot inventory pressure.

 

Going forward, attention should be paid to some aspects, including the detailed implementation rules and depth of impact of the lithium battery consumption tax policy, the actual pace of production resumption and ramp-up at the Jianxiawo mine, the replenishment speed of new exchange warrants after concentrated warrant cancellations, and the validation of traditional peak-season demand during August–September.

 

Edited by Cassie Li, lixiangying@mysteel.com