Lithium carbonate prices fell past CNY 76,000 per tonne in late February, the lowest since the start of the year, as persistent oversupply pressures continued to weigh on the market.
Lithium falls to year-to-date low
While demand for electric vehicles (EVs) remains strong, with sales in China rising 17% annually in January and accounting for over 42% of total vehicle sales, the outlook for lithium remains bearish due to elevated battery inventories. Despite Beijing's rollout of new fiscal incentives to support new energy vehicle (NEV) purchases, manufacturers have been slow to secure fresh lithium supply contracts, given their existing stockpiles.
Miners refrained from scaling back production
At the same time, lithium miners have largely refrained from scaling back production, aiming to maintain market share and sustain relationships with governments and battery manufacturers. This reluctance to curb output has exacerbated the surplus, keeping prices under pressure. The latest developments highlight this dynamic, with CATL reopening a lithium mine in Jiangxi province following its Hong Kong IPO, signaling its intent to secure domestic supply for its battery operations. Meanwhile, Ganfeng Lithium launched a new mining project in Salta, Argentina, expanding its global production footprint despite weak prices.
Competition is intensifying
In addition, competition in the lithium sector is intensifying, with major mining companies positioning themselves for long-term growth. Rio Tinto, one of the world's largest mining firms, made a significant move by announcing its $6.7 billion acquisition of US-based Arcadium Lithium, aiming to strengthen its presence in the rapidly growing battery materials market. The deal reflects a broader industry trend of strategic investments in lithium assets, as major players anticipate a supply-demand rebalancing in the coming years driven by the global energy transition.
Looking ahead, market participants will closely monitor policy developments in China, potential production adjustments by key lithium miners, and shifts in EV battery demand. While short-term oversupply continues to weigh on prices, expectations of long-term growth in the EV sector and energy storage markets could eventually support a recovery in lithium prices.
