Lithium price rally in China prompts caution over whether it has legs
Lithium prices in China climbed for a third day on demand optimism, although the sharp move higher has raised concerns about the sustainability of the rally.
The most-active lithium carbonate contract on the Guangzhou Futures Exchange surged past 100,000 yuan ($14,065) a ton on Wednesday, before paring some gains. Spot prices for the battery material also advanced to the highest level since July 2024.
Futures have increased almost 20% so far this month on growing confidence in the demand outlook, helped by interest from the energy storage sector. Bullish sentiment intensified after Ganfeng Lithium Group Co.’s chairman predicted prices could reach as much as 200,000 yuan next year if demand increases more than 30%. The metal had been broadly sluggish since its 2022 peak, held back by a glut and slower-than-expected electric vehicle sales growth.
“The short term fundamentals still offer upward momentum, but the surge has slightly surpassed expectations,” said Su Jinyi, analyst at Sublime China Information Co.’s Fubao lithium battery department. The market should monitor price correction risks, if sentiment cools down, or if there’s more profit-taking or hedging activity, Su said.
The Guangzhou bourse said on Tuesday that the contracts for January delivery will have a higher transaction fee from Thursday, a step typically taken by Chinese futures exchanges in an attempt to temper speculative trading.
“We believe there is a near-term lithium price pullback risk in end-25,” said Dennis Ip, analyst at Daiwa Capital Markets Hong Kong Ltd., adding that the market is overlooking the pace of supply growth, especially if higher price expectations become baked in for 2026. At the same time, stronger lithium prices won’t be easy to pass on to downstream buyers in the automotive and energy storage sectors, Ip said.
Shares in Chinese producers have tracked the rally in lithium futures and spot markets. Tianqi Lithium Corp. advanced as much as 8% on Wednesday in Shenzhen, and was set for the highest close in more than two years, while Ganfeng rose up to 7%. Chilean miner SQM said in an earnings presentation that it expects the upward price trend to continue through the fourth quarter.
(By Annie Lee and Jessica Zhou)
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Comments
Kwyjibo
Ip says “… stronger lithium prices won’t be easy to pass on to downstream buyers in the automotive…” but lithium is only a very small percentage of an EV battery so a doubling or tripling of the price won’t materially affect the cost.