[SMM Analysis] V-Shaped Rebound Followed by High-Level Fluctuations, Tight Balance Persists

In the second quarter, domestic lithium carbonate prices experienced a V-shaped rebound and then traded in a high-range volatile pattern. The market maintained a tight balance between supply disruptions and resilient demand, with price sensitivity notably heightened.

I. Market Performance: Wide Fluctuations with Rising Price Sensitivity

In April, prices first fell then rose: early in the month, geopolitical disturbances in the Middle East dragged battery-grade lithium carbonate down to 155,500 yuan/ton; by mid-to-late April, Zimbabwe’s export ban, mining permit renewals in Jiangxi, and rising costs pushed prices back up, ending the month at 177,000 yuan/ton. The monthly average price rose 6% month-on-month. In May, prices trended upward with a monthly average increase of 12%, and the futures main contract briefly broke through RMB 200,000/ton, as time mismatches between supply and demand persisted. In June, record-high import volumes and GFEX stocks remaining at 50,000 tons, combined with fully priced-in demand expectations, pulled the price center lower. Downstream buyers accumulated large inventories at levels below 160,000 yuan/ton.

II. Policy Environment: Dual Drivers from Mandatory Recycling Rules and Rigid Energy Storage Targets

On April 1, the Interim Measures for the Management of Recycling and Comprehensive Utilization of Waste Power Batteries from New Energy Vehicles took effect, mandating "integrated vehicle-battery scrap page" and requiring a lithium recovery rate of no less than 85%. This shifts recycling from "encouragement and guidance" to "mandatory compliance," boosting long-term resource circularity. On June 25, the 15th Five-Year Plan for the Construction of a New Energy System set a target of 300 GW of new energy storage installed capacity by 2030, representing over 120% cumulative growth in five years. This elevates energy storage from "optional" to "essential," providing rigid support for lithium demand.

III. Supply Side: Steady Release with Structural Disruptions

Domestic production maintained a stable pace in Q2, with salt lake ramp-ups and recycling additions pushing monthly output above 107,000 tons and edging higher. External disruptions such as Zimbabwe’s export ban did not significantly impact production, as companies held ample raw material inventories. The inventory pattern shifted from "demand-driven destocking" to "structural volatility underprice bargaining". A declining proportion of long-term contracts exacerbated spot-market fluctuations, with upstream producers firm on prices and downstream buyers cautious in procurement, while traders became the primary buffer. The market entered a high-price-sensitivity tight-balance state.

Conclusions

In Q2, lithium carbonate prices first rose then corrected, supported by supply disruptions and high production schedules, while record imports and warehouse receipt pressure weighed on June prices. On the policy front, new recycling rules and energy storage targets provide medium-to-long-term support. Supply growth remained relatively stable but with frequent disturbances, and upstream-downstream bargaining deepened. In the short term, the market remains in a high-level tight balance.