SMM Insights: 2025 H1 Lithium Carbonate Market Review and H2 Outlook

I. Price Review

Price review in stages:

• Early January 2025 - Late January 2025: Pre-Chinese New Year stockpiling drives active market transactions and price increases

In the first half of January, downstream material plants were still in the pre-Chinese New Year stockpiling phase. Coupled with the ongoing tug-of-war between upstream and downstream parties over discounts for long-term lithium carbonate contracts, with a low signing ratio, downstream material plants were more active in spot lithium carbonate procurement. Additionally, some upstream lithium chemical plants had already initiated production line maintenance at the beginning of the month. Amid active downstream procurement, the spot lithium carbonate market experienced relatively tight supply, stimulating a continuous increase in spot lithium carbonate prices, which peaked at 78,000 yuan/mt.

• Early February 2025 - Early April 2025: Lithium carbonate supply reaches new highs, clear supply surplus pattern drags prices down steadily

After the Chinese New Year holiday, due to sufficient pre-holiday stocking by downstream material plants, their purchase willingness was weak, and they mainly adopted a wait-and-see attitude. Meanwhile, domestic lithium carbonate output in March totaled approximately 79,000 mt, hitting a record high. Coupled with high import volumes, the significant surplus pattern of lithium carbonate persisted, dragging prices down steadily.

• Mid-April 2025 - Late June 2025: Customer-supplied ratio rises again + intensified tug-of-war between longs and shorts in futures market, lithium carbonate prices fall rapidly

In April, the customer-supplied ratio of downstream material plants rose again, and their willingness to procure inventory weakened continuously. Against the backdrop of intensified tug-of-war between longs and shorts in futures market, lithium carbonate prices entered a rapid bottom-hitting process. The price of the most-traded futures contract fell rapidly from above 70,000 yuan/mt to 58,000 yuan/mt, while the spot price dropped from 70,000 yuan/mt to 60,000 yuan/mt, with a monthly average price decline exceeding 10%. Meanwhile, on the cost side, due to high port lithium ore inventory, ore prices fell rapidly, weakening the cost support for lithium carbonate and further dragging down lithium carbonate prices.

• Late June 2025 - Mid-July 2025: Irrational futures rebound, but actual supply and demand fundamentals remain in surplus

Affected by market rumors such as a significant increase in July demand expectations and production cuts or suspensions on the supply side, lithium carbonate futures prices experienced an irrational and continuous rebound. Downstream acceptance of these price levels was extremely weak, and there was no intention to build inventory. Instead, they generally adopted the forms of increasing long-term contract volumes or customer-supplied materials to meet production needs. Only some enterprises, driven by just-in-time procurement needs, saw an increase in the center of transaction prices, but overall market transactions were scarce. The average spot price of lithium carbonate rebounded to around 64,500 yuan/mt.

II. Supply Side

1. Total Domestic Lithium Carbonate Production

In the first half of 2025 (H1 2025), China's total domestic lithium carbonate production reached approximately 430,000 mt, up 44% YoY. Production breakdown by raw material:

• Spodumene-derived lithium carbonate: In H1 2025, China's total domestic production derived from spodumene was about 225,000 mt, accounting for 52% of the total, up 74% YoY. Spodumene-derived lithium carbonate still dominates half of the domestic lithium carbonate production, and its share continues to expand. On one hand, first- and second-tier enterprises continue to expand with their integrated and low-cost advantages; on the other hand, hedging opportunities provided by the futures market offer production incentives for non-integrated enterprises. Overall, the YoY production increase is significant.
• Lepidolite-derived lithium carbonate: In H1 2025, China's total domestic production from lepidolite was about 98,000 mt, accounting for 23% of the total, up 22% YoY. The supply of lithium carbonate derived from lepidolite is mostly at a high marginal cost, and non-integrated enterprises face limited production increases due to cost pressures, with even higher probabilities of production cuts or suspensions. In February, the ultra-high supply level brought about by the resumption of production at leading lithium chemical plants in Jiangxi provided strong support for lithium carbonate production derived from lepidolite, and the total market share did not shrink further, temporarily maintaining a certain market share.
• Salt Lake-derived lithium carbonate: In H1 2025, China's total domestic production from salt lakes was about 68,000 mt, accounting for 16% of the total, up 21% YoY. The salt lake sector still has certain production advantages due to its low cost, but considering the harsh production environment in domestic salt lake regions and the time required for the advancement of newly commissioned projects, there has been no significant increase in production.
• Recycled lithium carbonate: In H1 2025, China's total domestic production from recycling was about 38,000 mt, accounting for 9% of the total, up 19% YoY. Due to the current tight supply of black mass, hydrometallurgy plants are experiencing severe losses, and enterprises frequently reduce or suspend production. Most operating enterprises are integrated recycling plants or those primarily engaged in toll processing. Overall, the recycling sector faced significant pressure to increase production in H1.

2. Lithium Carbonate Imports

According to customs data,China's lithium carbonate imports in H1 2025 reached approximately 123,000 mt, up 15% YoY. Chile and Argentina remain China's main import sources. Among them, the total volume of lithium carbonate imported from Chile was about 80,000 mt, down 5% YoY, accounting for 65% of China's total imports; the total volume of lithium carbonate imported from Argentina was about 37,000 mt, up 89% YoY, accounting for 30% of China's total imports. The Lithium Triangle region in South America holds a dominant position, but its internal structure has undergone certain changes, with Argentina's share increasing.

Lithium Chile's shipment data for the first half of the year (H1) showed a YoY decline, primarily due to the increased proportion of customer-supplied materials by domestic enterprises in recent months, which slightly weakened their willingness to pick up goods. However, the annual shipment targets of major overseas lithium chemicals enterprises have not been adjusted yet, and they are expected to gradually make up for the shipment volume in the second half of the year (H2). Meanwhile, the capacity of lithium carbonate produced by Chinese-funded enterprises in Argentina continues to be released, with a significant increase in Argentina's export volume and a continuously expanding proportion.

III Demand

In the first half of 2025, the domestic demand for lithium carbonate reached approximately 522,000 mt LCE, up 52% YoY. By application sector:

• LFP: In the first half of 2025, LFP's demand for lithium carbonate accounted for 73% of the total, up 79% YoY.
• Ternary materials: In the first half of 2025, ternary materials' demand for lithium carbonate accounted for 9% of the total, down 14% YoY.
• LCO: In the first half of 2025, LCO's demand for lithium carbonate accounted for 4% of the total, up 21% YoY.
• LMO: In the first half of 2025, LMO's demand for lithium carbonate accounted for 3% of the total, up 23% YoY.

NEV Market: In the first half of 2025, global NEV sales reached approximately 8.8 million units, up 26% YoY. Among them, NEV sales (including exports) in the Chinese market amounted to approximately 6.94 million units, accounting for about 79% of the global market, with a cumulative increase of 41% YoY, achieving growth that exceeded expectations.

ESS Market: In the first half of 2025, China's ESS market exhibited a growth trend that exceeded expectations. Despite the National Energy Administration issuing the "Guidance on the Development of Energy Storage in New-Type Power Systems" at the beginning of the year, which explicitly removed the mandatory energy storage allocation requirements for new energy projects, local governments have successively introduced more targeted subsidy policies. Meanwhile, amid the deepening reform of the electricity market, the economic viability of energy storage projects has significantly improved. Additionally, in overseas markets, influenced by adjustments in tariff policies between China and the United States, domestic enterprises are expected to rush to export energy storage battery cells within the 90-day policy window, which will provide a certain boost to the demand for energy storage battery cells in the short term.

IV Supply-Demand Balance and Inventory Levels

1. Supply-Demand Balance

Considering both supply and demand, there was a surplus of approximately 30,000 mt of domestic lithium carbonate in the first half of 2025 (H1 2025), and the overall inventory maintained an upward trend. Looking at the monthly situation, only January and May 2025 saw a slight destocking phenomenon, but the extent of destocking was relatively limited. The main influencing factors all stemmed from the contraction on the supply side.Specifically:

• In January, affected by concentrated maintenance of production lines at lithium chemical plants around the Chinese New Year, the overall industry operating rate declined. Lithium carbonate monthly production dropped to the lowest level in H1 (62,500 mt), resulting in a tight balance for the month with minor destocking.
• In May, as lithium carbonate prices plunged rapidly, some non-integrated lithium chemical plants were forced to reduce or halt production due to cost pressure, leading to short-term supply tightening and a temporary inventory pullback.

Other months showed inventory buildup to varying degrees, with the overall supply-demand pattern remaining relatively loose.

2. Inventory Level

As of June 30, 2025, China's cumulative lithium carbonate sample inventory stood at approximately 140,000 mt. Upstream lithium chemical plants accounted for the highest proportion at 42%, downstream material plants about 30%, and other segments around 27%.

Inventory Change Trend: Share of Inventory Held by Upstream Continues Rising While that by Downstream Remains Stable

During H1 2025, the continuous decline in lithium carbonate prices caused the inventory share of upstream lithium chemical plants to expand monthly. Lithium chemical plants strongly refused to budge on prices and held back sales, slowing down their shipment pace. Except for enterprises with high long-term contract order ratios maintaining normal shipments, other lithium chemical plants showed weakened market shipment sentiment. Against this backdrop, traders became the main market liquidity providers, with their shipment volumes significantly increasing and inventory share shrinking. Downstream material plants kept inventory levels within a reasonable range amid rising customer-supplied ratios, maintaining relatively stable inventory shares.

To better monitor inventory dynamics, SMM developed the Inventory Cycle Index, covering upstream, downstream, and other key segments. The SMM Inventory Cycle Index adopts standardized data processing methods, converting raw inventory data into comparable indexed indicators through quantitative analysis of absolute inventory values across the industry chain (standardized against monthly lithium carbonate demand). This index system visually reflects the relative relationship between current inventory levels and market demand.

Index Construction Methodology:

• Upstream Inventory Cycle Index = Lithium chemical plant lithium carbonate inventory / downstream enterprises' lithium carbonate demand in the month

• Downstream Inventory Cycle Index = Cathode material plant lithium carbonate inventory / downstream enterprises' lithium carbonate demand in the month

• Other Segments Inventory Cycle Index = Trader segment inventory / downstream enterprises' lithium carbonate demand in the month

Currently, upstream lithium chemical plants maintain an inventory cycle of about 18 days; downstream material plants about 14 days; and other segments approximately 12 days.

V. Lithium Carbonate Supply and Demand Outlook for H2 2025

Demand side, China remains the dominant player in both the NEV and ESS sectors.

NEV market, China achieved better-than-expected growth in H2 2024 driven by the trade-in subsidy policy, with full-year NEV sales exceeding 12.5 million units. For H2 2025, affected by the high base effect, the YoY growth rate is expected to slow down but remain ata steady pace. ESS market, bolstered by continuous local subsidy policies, electricity market reforms, and emerging overseas ESS markets, China's ESS sector is projected to achieve over 30% YoY growth in H2.

Supply side, first- and second-tier lithium chemical plants continue expanding market share through cost and integration advantages. The current irrational rebound in futures markets has provided production incentives across the industry, motivating non-integrated plants who previously operated at low capacity to significantly increasing operating rates by seizing hedging opportunities. Domestic lithium carbonate production is forecast to rise over 30% YoY in H2. Meanwhile, lithium carbonate imports also show growth. Chile maintains high shipment levels while Argentina continues raising production. Overall, domestic lithium carbonate supply remains robust, with supply surplus expected to persist throughout H2.