Market sentiment has improved on the back of strong demand signals; however, price expectations depend on supply growth in 2026.

China’s domestic lithium carbonate market is expected to undergo a significant shift in 2026. Strong supply growth is expected to persist into 2026, with the potential for 200–300kt of lithium carbonate supply additions.

In previous years, this volume of supply growth has generally outpaced demand; however, this could change in 2026, as battery energy storage (BESS)-driven demand is expected to increase by roughly 300kt LCE. This would leave the market in a tight balance, with any delays in mine development or project commissioning posing a substantial risk to lithium carbonate supply availability.

Strong demand, notably from BESS, has resulted in optimistic market sentiment, with some market participants expecting lithium carbonate prices to reach RMB120,000/t (US$17,000/t) in 2026.

These higher price expectations are supported by a leaner supply chain heading into 2026, with significant destocking occurring in the tail end of 2025, reducing the market’s ability to shield itself against future demand shocks.

However, many mid-stream and downstream manufacturers have front-loaded or are in the process of front-loading purchases to hedge against projected price increases. Therefore, prices could soften heading into the seasonally weaker purchasing period in Q1 2026.

Overall, demand is looking healthy, with leading lithium salt producers already showing strong order books for next year.

Contract-pricing mechanisms have continued to evolve in 2025, with approximately 20% of lithium mineral concentrate transactions priced via mechanisms utilising lithium futures. The reliance on third-party index prices is expected to continue to decline.

Carbonate pricing is also expected to move away from a cash-cost-based approach, instead moving towards full-cost-plus-premium models, reflecting the stronger downstream demand.