While lithium carbonate prices are ultimately determined by lithium salt supply-demand dynamics and market trading, price signals typically first emerge at the lithium ore level.
As the core feedstock for lithium carbonate, lithium ore offers a window into future price trends. Port inventories show whether these resource flows are being absorbed by downstream consumers or are instead accumulating in the trading channel; traders' inventories indicate whether market participants are inclined to hold or offload cargoes; daily transaction volumes indicate downstream buying appetite; converters outsourced feedstock stocks reveal the feedstock buffer at the refining level; and processing fees signal how urgently converters need ore.
Collectively, these indicators provide an early read on cost support, supply-demand trends, and possible price turning points for lithium carbonate, before signals appear at the salt level.
This report draws on the latest survey data as of August to assess the lithium price outlook from the ore side.
Lithium Ore Inventory
As of August 6, lithium ore spot inventories among 32 sampled traders stood at 124,000 tonnes, up 15,000 tonnes week-on-week, of which marketable inventories were 91,000 tonnes, up 27,000 tonnes week-on-week. Overseas ore continued to arrive at ports, and lithium converters maintained active offtake. However, with ample in-plant inventories built up earlier, the trading segment saw slower sales, and both spot and marketable inventories edged up modestly.
Source: Mysteel
Domestic lithium ore port inventories stood at 258,000 tonnes as of August 6, up 18,000 tonnes week-on-week, of which Zhenjiang Port accounted for 161,000 tonnes, down 7,000 tonnes week-on-week. With ongoing ore arrivals and Q3 stockpiling already completed, much of which at high prices, the lithium converters producers have turned more cautious, slowing their procurement pace.
While port inventories are still building, the rate of increase in traders' inventories has slowed. Yet with forward supply expectations rising, resource pressure for now remains largely concentrated in the trading channel.
Transaction Volumes and 30-Day Rolling Transaction Price
Inventory data alone is incomplete without transaction volume validation. In the first 11 days of August, average daily spot lithium ore transactions came in at 2,142 tonnes, while transactions under back-pricing orders averaged 4,412 tonnes, down 55.9% from July, suggesting most enterprises had already closed their back-pricing orders in July.
Spot transactions better reflect downstream buyers' appetite for immediate feedstock, whereas back-pricing orders reveal forward price expectations and procurement strategy. The quality of destocking largely depends on whether volume growth is driven by spot demand rather than back-pricing.
Currently, spot transactions have stabilized, but back-pricing activity has softened. The earlier period of high-price volatility led to the closure of considerable back-pricing orders, reducing enterprises' capacity to absorb lower-priced cargoes. As a result, August production costs are expected to remain high.
The 30-day rolling average of lithium ore prices based on back-pricing orders serves as a proxy for the dynamic feedstock cost that converters relying outsourced feedstock have locked in but have yet to fully process. Unlike single-day price settlement, it smooths out daily fluctuations and offers a clearer picture of the actual cost base that lithium converters are taking.
As of August 11, the 30-day rolling weighted average stood at Yuan 147,028/tonne LCE (lithium carbonate equivalent), down Yuan 12,370/tonne LCE from July, while the single-day average was Yuan 144,800/tonne LCE, against Yuan 145,000/tonne based on Mysteel's assessment.
The fact that the 30-day rolling average remains above the single-day average suggests that high-cost feedstock from earlier purchases is still working its way through the production chain. Even though daily ore quotes have softened, the dynamic cost for converters remains resilient. The key variable ahead is whether the spread between lithium carbonate market prices and this rolling cost level continues to narrow.
Converters' Outsourced Feedstock Inventory
As of July, lithium ore inventories at 19 converters relying on outsourced feedstock totaled 459,000 tonnes, up slightly month-on-month, representing about 34 days of production cover. Converters were actively buying through July, drawing traders' inventories down. Yet a clear divergence has opened, where large-sized converters have strengthened their ore-locking capabilities, while smaller ones, uncertain about future supply, have idled production after securing only limited stocks.
These converters are the primary off-takers of lithium ore. Their inventory levels not only reflect current procurement activity but also determine how flexibly lithium carbonate output can adjust over the coming months.
Currently, feedstock inventories at these converters have edged lower, operating rates remain stable, and forward supply is largely covered by long-term agreements. The key ahead is whether spot procurement picks up consistently. Restocking demand over the next one to two weeks will be a critical signal to watch.
Lithium Ore Processing Fee
Processing fees serve as a useful micro-indicator linking the ore market to lithium salt production. Low processing fees typically point to tight ore inventories at converters, heightened feedstock security concerns, and reduced leverage over processing margins.
As of August 7, processing fees averaged Yuan 17,750/tonne, up Yuan 200/tonne from July, but still near historic lows. While this suggests marginal easing on the ore side, overall supply-demand has remained tight.
Therefore, when current processing fees remain low but are creeping higher, it serves as a sign that while converters' feedstock inventories are still lean, their appetite for fresh cargoes has softened. Should port lithium ore inventories start to decline, persistently low fees would confirm that ore tightness is beginning to feed through to lithium carbonate prices.
Yet if port and traders' lithium ore inventories keep rising, spot activity stays muted, and converters avoid restocking despite lean stocks, then low processing fees likely reflect soft demand-driven margin squeezing rather than a supply-side floor, offering little evidence of a trend reversal.
Summary
To sum up, a logical sequence for analysis would be to start with port and traders' ore inventories, then move to transaction volumes and the 30-day rolling average, followed by converters' outsourced feedstock inventories, and finally processing fees. Transaction volumes indicate real purchasing appetite, while the 30-day rolling average serves as a proxy for the dynamic cost level. Combined, these metrics offer a read on how much feedstock cost lithium converters can undertake.
Going forward, four key signals should be monitored for consecutive confirmation: sustained port inventory drawdowns beyond single-week fluctuations; coordinated declines in traders' lithium ore inventories, which would confirm improved holding appetite; growth in daily transactions driven by spot demand rather than back-pricing alone; and sustained restocking by lithium converters when inventories are low, with processing fees holding at low levels. The simultaneous appearance of these signals would offer strong evidence that a more sustained recovery in lithium carbonate prices is taking hold.
Early signs of bottom-fishing are appearing in the lithium ore market, but confirmation hinges on sustained port inventory drawdowns and a clear pick-up in spot transaction volumes. Should restocking by converters coincide with persistently low processing fees, and downstream demand continue to firm, lithium carbonate prices could break out of their current range and trend higher.
Written by Aggie Hu, huchenying@mysteel.com
