TRADE REVIEW: Asian lithium to face ongoing headwinds in Q4 amid China supply uncertainty

This report is part of the S&P Global Energy Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, nickel and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts to new arbitrages, and to quality spread fluctuations.

Asian lithium prices are anticipated to encounter ongoing challenges in the fourth quarter of 2025 as the market closely monitors developments related to the recent disruptions in lithium mining supply in Jiangxi province, caused by licensing issues.

The closure of Contemporary Amperex Technology Co. Ltd.'s lithium mine in August raised concerns about potential prolonged supply disruptions.

Throughout August-September, China-based market sources closely monitored the potential impact on supply from the other affected mines. The bullish market sentiment due to supply disruptions significantly impacted lithium prices, particularly on the Guangzhou Futures Exchange, where they peaked at Yuan 89,240/metric ton (approximately $12,569/mt) on Aug. 18.

The supply surplus in lithium will likely regain focus after the recent Jiangxi mining issues are resolved, and when the traditional peak demand season in September-October is over, analysts from S&P Global Energy Metals and Mining Research team said. Globally, a supply surplus of 182,000 mt of lithium carbonate equivalent is currently projected for 2025, they added.

Lithium carbonate prices experienced heightened volatility in the third quarter due to supply disruptions, as prices climbed following the closure of CATL's Jianxiawo mine on Aug. 7, along with several other lithium mines in Jiangxi province due to mining license issues. Seven other lithium mines in Yichun, Jiangxi, were also requested to submit reports on reserves by the end of September and may face operational license renewal challenges in the near term, prompting the market to monitor the situation for further developments.

Chinese authorities issued the initiative for "anti-involution" on Sept. 1, which aimed to address overcapacity and lithium market competition. However, market sources did not expect it to bolster the Chinese lithium market as overcapacity persists.

The lithium market also faced pressure on Sept. 10 with market talks of an earlier-than-expected resumption of production at the Jianxiawo mine. Market participants, including analysts and traders, expect that once CATL resumes operations at Jianxiawo -- which accounts for 3%-5% of global lithium supply for electric vehicles -- or if other mines continue production, domestic lithium carbonate prices could drop to around Yuan 60,000/mt ($8,412/mt).

Platts, part of Energy, assessed lithium carbonate on a DDP China basis at Yuan 72,800/mt on Oct. 15, up 18.37% from July 1, while lithium hydroxide rose 34.23% at Yuan 74,500/mt DDP China on Oct. 15, leaving a price gap of Yuan 1,700/mt between hydroxide and carbonate.

Q3 battery demand provides support to domestic lithium

Meanwhile, improved downstream demand provided some support to lithium prices in Q3, with numerous China-based market sources expressing a positive outlook on year-end planned battery production.

China's EV sales in August rose 10.5% month over month and 26.8% year over year, reaching 1.4 million units, according to China Association of Automobile Manufacturers. Power battery sales in China experienced an 8.5% increase month over month in August, with NMC battery sales capturing a 25% market share at 24.7 GWh and LFP battery sales comprising 74.8% with 74.0 GWh, according to China's Automotive Power Battery Industry Innovation Alliance.

Seaborne lithium prices

Seaborne lithium prices witnessed a similar upward trajectory in Q3 under the influence of the domestic lithium price trend. In the quarter leading up to the Inflation Reduction Act's subsidy deadline on Sept. 30, several sources actively trading in the seaborne market noted an increase in downstream restocking activity aimed at securing the $7,500 EV tax credit.

A trader from an international metal trading company also observed a pickup in buying interest as prices dipped below the $10,000/mt level during September, viewing it as a buying opportunity.

Most market sources highlighted that both lithium carbonate and hydroxide prices were nearing or at parity, with more spot trading activity occurring in South Korea compared with Japan.

Platts assessed battery-grade lithium carbonate and lithium hydroxide at $9,550/mt and $9,450/mt CIF North Asia as of Oct. 15, both up 17.18% and 15.95%, respectively, from $8,150/mt July 1.

Spodumene tracks Chinese lithium price fluctuations

Upstream, spodumene -- the primary feedstock for lithium chemicals -- peaked at $985/mt FOB Australia on Aug. 15, the highest price since late June 2024. The surge was initially driven by news of lithium supply disruptions but subsequently weakened as lithium futures prices softened for the remainder of Q3.

Spodumene prices closely followed the lithium price trend on the GFEX. Market participants were seen to back-calculate spodumene prices based on lithium carbonate prices on the GFEX with varying tolling costs, ranging between Yuan 19,000-22,000/mt. Lithium refiners might raise their costs to maintain their profit margins, a trader in metals trading business said.

LCE margins throughout Q3 have fluctuated in tandem with the volatile lithium futures prices, remaining largely negative. Based on the Platts-assessed spot price of spodumene concentrate with 6% lithium oxide content at $820/mt FOB Australia and battery-grade lithium carbonate at Yuan 72,500/mt DDP China ($10,203/mt), the theoretical margin was estimated at negative $295/mt on Sept. 30.

China-based sources said that while Chinese lithium refiners were interested in buying spodumene, the offers from sellers remained high, resulting in fewer trades. Only buyers, such as lithium refiners and traders, who had previously hedged on lithium futures at favorable prices on GFEX could consider purchasing spodumene at higher prices, according to market participants.

Platts has launched SpodIX, a new daily CIF China spodumene concentrate spot price assessment reflecting 6.0% lithium oxide pricing basis, effective Sept. 1.

Platts assessed SpodIX CIF China at $833/mt on a 6% lithium oxide pricing basis Oct. 15, up $3/mt day over day but down $7/mt week over week.

Platts assessed spodumene concentrate with 6% lithium oxide content increased 32.46% from July 1 to $808/mt FOB Australia on Oct. 15, while spodumene concentrate with 5.5% lithium oxide content was assessed at $761/mt CIF China. The 0.1% spodumene concentrate differential, reflecting the value of each 0.1% of lithium oxide for spodumene grades within a range of 5.5%-6%, was assessed at $13.47/mt FOB Australia Oct. 15.