[SMM Analysis] LCO Prices Kept Falling in Q3; Decline to Narrow in Q4, Bottoming and Recovery Expected in 2027

Lithium cobalt oxide (LCO) prices maintained a downward trend in Q3 2026, dragged down by dual pressures of falling upstream raw material costs and weak downstream end-market demand. Structural inventory issues further amplified the price decline. On the raw material side, lithium carbonate and cobalt tetroxide, the two core feedstocks for LCO production, continued to weaken in Q3, creating sufficient room for LCO price cuts. Smelters suffered continuous losses due to sluggish downstream purchasing and kept suppressing procurement prices of upstream feedstocks such as mixed hydroxide precipitate (MHP) and spent battery powder, forming a negative industrial chain cycle: raw material price drop → finished product cost reduction → finished product price cuts.

Weak demand serves as the core factor weighing on LCO market performance. The consumer electronics market remained sluggish, with weak output and shipments of core 3C products including smartphones, tablets and PCs. Battery manufacturers saw insufficient demand for end-product installation, leading to sharp contraction in LCO procurement volume. Meanwhile, the industry faced heavy inventory pressure. Most LCO producers built up large stockpiles of raw materials and finished products in advance to guard against supply chain risks. Amid the sustained weakening of end demand in Q3, the mismatch of high inventory and low demand intensified across the sector. Battery manufacturers proactively reduced inventory and cut purchase orders. LCO manufacturers lowered operating rates and cut prices to liquidate inventory and recover funds, jointly driving down LCO prices in Q3.

Heading into Q4 2026, LCO prices are projected to stay weak but the pace of decline will moderate. Downside risks remain in the short term: there is no obvious sign of recovery in consumer electronics terminals, and the traditional Q4 consumption season will deliver limited stimulus. Downstream cell manufacturers remain conservative in restocking, making it hard for LCO procurement demand to recover rapidly. High inventories accumulated in earlier periods have not been fully digested, and the de-stocking cycle will run through Q4, leaving enterprises under pressure to sell at discounted prices. Lithium carbonate and cobalt tetroxide prices have yet to show signs of stabilization, raw material costs keep falling, and the negative cycle of the industrial chain has not ended.

Nevertheless, marginal positive factors are emerging to support the narrowing of price declines. Rigid demand from sub-sectors such as low-end devices and smart wearables can offset part of the overall demand downturn. The downward room for upstream raw material prices is gradually compressed, and smelters have hit critical loss thresholds, leaving limited room for further deep price cuts, which will form bottom support for LCO prices.

Looking forward to 2027, LCO prices are expected to halt the continuous downtrend and follow a trajectory of bottoming out and mild oscillating recovery, with the annual price center rising moderately. On the positive side, after full-year de-stocking and low-capacity operation in 2026, raw material and finished product inventories of the LCO industry will return to reasonable levels, the supply-demand balance will gradually improve, and passive pressure for manufacturers to sell at reduced prices will be largely removed. The supply and demand landscape of upstream lithium carbonate and cobalt tetroxide is set to improve, with prices expected to stabilize and rebound, rebuilding the cost support system for LCO. Steady iteration of consumer electronics terminals and incremental demand from emerging wearable devices such as AI smart glasses will bring new growth momentum for LCO demand.

Notable constraints remain: the main 3C terminals see slow iteration and mild overall demand fluctuations with no logic for explosive growth. Mid-to-low-end tablets and PCs keep replacing LCO with ternary materials, which will continuously cap LCO demand growth. The industry has ample overall production capacity, and the loose supply-demand pattern cannot be completely reversed. Overall, LCO prices in 2027 will witness structural recovery with moderate oscillations and limited volatility.