GUANGZHOU – Chinese lithium futures have shed a quarter of their value in September, pummelled by concerns over flagging demand.
Often prone to volatile trading, the Guangzhou exchange’s contract for lithium carbonate, a refined form of the metal used in electric-vehicle batteries and larger energy-storage systems (ESS), has slumped below 120,000 yuan (S$22,878) a ton from over 160,000 yuan at the start of September.
The plunge in price caps an otherwise dynamic year for the industry in China this 2026 – the world’s largest.
Constraints on mine supply, strong export growth and the emergence of utility-scale batteries as a major demand driver have revived the market after it bottomed in 2025.
In 2025, the Guangzhou contract was around 74,000 yuan a ton. But optimism is starting to crumble.
“There is a mounting sense of doubt that the consumption momentum can hold up to the end of 2026 sufficiently to absorb the strong cell production we have seen recently,” said Adam Megginson, principal lithium price analyst at consultancy Benchmark Mineral Intelligence.
“The story here is not about immediate demand, but worries regarding demand resilience in the mid-term.”
Like many Chinese industries, even the successful ones, battery-makers have built too much capacity relative to demand. To address that, the government suspended in September the construction of new projects.
The imposition of a consumption tax on lithium-ion batteries and macro headwinds in the wider economy are further clouding prospects for demand.
Global trade barriers, especially in the European Union, and tighter US monetary policy pose yet more risks to the outlook.
Into that mix, a private survey of Chinese inventory earlier in September confounded many in the industry by pointing to much bigger stockpiles than expected, sparking a heated debate and focusing attention on the true state of demand.
The plunge in shares at Contemporary Amperex Technology, the world’s biggest EV-battery maker, has also attracted negative headlines.
Still, there are those outside China who think the frayed nerves and steep price drop have been overdone.
“It seems to me that the decline is based on sentiment among certain investors rather than on the market itself,” said Ignacio Mehech, chief executive officer of Chilean miner CleanTech Lithium.
“There’s no market fundamental behind it, and it should reverse in the short term because analysts continue to see a deficit in the coming years,” he said in an interview in Santiago.
The Chinese EV market is sluggish and there’s a growing disparity between ESS battery cell production and actual installations, said Jordan Roberts, senior analyst at consultancy Project Blue.
Expectations of improved lithium supply into 2027 have also had an impact, he said.
“That said, the underlying supply-demand balance still points to monthly deficits for the rest of the year, which should mean continued inventory drawdown, albeit at a slower pace, offering some support to prices,” he said.
On the wire
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China’s factory activity expanded for the first time since June, with a slew of indicators showing the economy ended the third quarter on a bright note as policymakers move to deploy new measures to support growth.
China’s latest economic stimulus package appears designed to keep economic growth on target rather than deliver a broad revival, leaving the country’s underlying demand weakness largely unaddressed.
As Qu Shaolong pulls his electric truck into one of the many charging stations that dot the Chinese coal hub of Yulin, the latest phase in the country’s energy transition is playing out in real time. BLOOMBERG
