[SMM Analysis] LCO: Upstream Cost Drives Minor Adjustments, Downstream Restocking Remains Cautious and Wait-and-See

The second-life battery market maintained overall stable prices this week. Cost side, spot lithium carbonate surged significantly this week with notable gains, nickel sulphate continued its gradual rise, while cobalt sulphate traded sideways and held steady. Raw material futures showed clear divergence, with lithium carbonate leading the gains and pushing up overall lithium battery raw material costs, also laying potential support for subsequent second-life battery cell pricing. Supply side, shipments from various producers remained at a steady pace, with no significant changes in circulating supply in the market. Although lithium carbonate rose strongly after the holiday, there was a time lag in the transmission of raw material costs to the second-life battery market. Current price negotiations remained concentrated in the upstream raw material segment, and second-life battery enterprises largely maintained stable quotes without raising prices in line with raw materials. Demand side, the continued surge in lithium carbonate pushed up costs, significantly dampening downstream purchasing sentiment and restocking willingness. In addition, concentrated stockpiling had already taken place before the Labour Day holiday, and most enterprises currently held sufficient inventory to support turnover. With no plan to make just-in-time procurement in the short term, a strong wait-and-see atmosphere prevailed across the market, with transactions mostly consisting of small, as-needed orders.

Recently, Tianli Lithium Energy issued an announcement regarding uncovered losses reaching one-third of the total paid-in share capital. As of December 31, 2025, Tianli Lithium Energy's undistributed profit was -830 million yuan, with paid-in share capital of 119 million yuan, and the amount of uncovered losses exceeded one-third of the total paid-in share capital. Tianli Lithium Energy stated that the main reasons for the loss in 2025 were due to fluctuations in lithium carbonate prices and the volatile adjustment in the lithium iron phosphate industry, which led to insufficient operating rates for some of the company's production facilities, low capacity utilization, and high allocation of fixed costs per unit of product.