According to SMM research, the domestic lithium battery recycling market exhibited clear diverging trends in July 2026. During the month, recycled lithium carbonate output declined by 2% month-over-month. Recycled nickel sulfate and cobalt sulfate continued their year-long downtrend, with the weak performance persisting in July and no price recovery in sight.
In terms of supply structure, the shares of recycled lithium carbonate and recycled nickel sulfate in their respective national total outputs remained stable at 12% and 17%, showing no significant month-over-month fluctuations. In contrast, the supply share of recycled cobalt sulfate surged notably to 41%, marking the most prominent change on the supply side this month. Amid persistently weak downstream demand, primary lithium, nickel, and cobalt outputs also declined in July, leading to an overall contraction in primary raw material supply.
The decline in recycled lithium carbonate output during July was primarily attributable to tight feedstock circulation in the front-end scrap market, which constrained hydrometallurgical refiners' input material availability. Earlier, when lithium carbonate prices were elevated, black-mass producers had concentrated on procuring spent battery cells for stockpiling. However, as lithium prices continued to fall, those high-cost inventories turned into cost inversions, prompting a stronger reluctance to sell among holders. Consequently, the willingness to circulate LFP black mass weakened markedly. The tightening of tradable feedstock directly increased procurement difficulties for recycling refiners, forcing them to scale back input volumes. Coupled with the approaching implementation of the new consumption tax policy on lithium batteries in September, market participants adopted a widespread wait-and-see attitude, further dampening industry-wide feeding activity and dragging down recycled lithium carbonate output. Against the background of shrinking primary supply, the share of recycled lithium carbonate in total lithium salt supply remained stable, exerting limited impact on the overall lithium salt supply-demand balance.
Nickel and cobalt salts continued their year-long weak trend in July, with subdued prices and relatively stable output. Over the year, downstream demand for ternary cathode materials and precursors has steadily increased, yet buyers remained highly resistant to elevated raw material prices, persistently pressing for lower procurement costs. The market was largely characterized by restocking on rigid demand at discounted prices, with intense bargaining between upstream and downstream players dragging nickel and cobalt prices down throughout the year—a weak pattern that extended into July. On the supply side, the hydrometallurgical refining of ternary black mass primarily yields nickel, cobalt, and lithium salts. Production lines generally operate at a regular pace, exhibiting strong production rigidity with limited short-term flexibility. Meanwhile, most recycling enterprises maintained stable operating rates, with no signs of industry-wide production cuts. As a result, recycled nickel and cobalt output continued to grow, though the growth rate has decelerated compared to earlier periods due to downstream price pressure and cautious procurement, signaling a moderation in overall volume expansion.
The supply structure across different lithium battery recycling categories varies significantly. The lithium and nickel markets remain relatively stable, as fluctuations in recycled output can be flexibly offset by primary capacity, keeping their shares largely steady. The most pronounced change occurred in the cobalt salt market, driven primarily by adjustments in production lines among some cobalt tetroxide producers, who substantially reduced their consumption of cobalt sulfate. Even though recycled and integrated ternary producers slightly increased output, the incremental volume failed to offset the overall industry-wide reduction. Current cobalt scrap procurement remains generally subdued, with no operations to increase feeding or replenish raw materials. Coupled with limited domestic primary cobalt capacity release and insufficient import supplementation, a persistent supply gap exists in primary cobalt. Recycled cobalt has stepped in to fill this market void, pushing its share in domestic total cobalt sulfate output to 41%, further elevating the industry's dependence on recycled cobalt resources.
Looking ahead in the short term, before the consumption tax takes effect, the bargaining power of scrap feedstock is likely to remain weak, and recycled lithium carbonate output is expected to continue fluctuating at a subdued level. The nickel and cobalt markets will likely persist in a state of sluggish price recovery and rigid production, with prolonged downstream weakness constraining price trajectories. Over the medium to long term, as domestic power battery retirements gradually ramp up, the scale of recycled lithium battery raw materials will continue to expand. The industry structure, in which cobalt salts rely heavily on recycled resources, is expected to persist, while the shares of recycled lithium and nickel supplies are also projected to rise steadily.
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