Prices of lithium, a key raw material in electric vehicle (EV) batteries, are likely to head lower in the current half of this year due to resurgencies in supplies, but energy storage demand is likely to hold prices from any sharp fall, industry analysts have said.
Prices of lithium carbonate, a vital chemical compound used to produce EV batteries, dropped to a six-month low of 140,000 Chinese yuan ($20,770) a tonne as risks of a drop in consumption have combined with higher global supply. They have recovered by $1,000 over the past week.
The Trading Economics website said prices have come under pressure also because China has said it will end tax exemption for lithium-ion batteries to stop manufacturers from cutting prices to gain market share.
On Tuesday, lithium carbonate spot price ruled at 155,400 yuan ($23,054), while benchmark futures ruled at 152,000 yuan ($22,550).
“ We are revising up our 2026 average annual lithium price forecasts to $20,100/tonne for Chinese lithium carbonate 99.5 per cent and $19,600/tonne for Chinese lithium hydroxide monohydrate 56.5 per cent, as prices maintained solid upward momentum throughout Q2 2026,” said research agency BMI, a unit of Fitch Solutions. Lithium hydroxide monohydrate is another chemical compound used in EV battery production.
However, it expects lithium to drift lower this half, on imminent Chinese supply resurgence, alongside project restarts in Australia, which look to curtail the rally and serve as the primary bearish catalyst for the remainder of the year.
Australia’s Office of the Chief Economist (AOCE) said prices of spodumene concentrate, a high-purity lithium aluminum silicate powder produced by crushing and processing hard-rock pegmatite ore, are forecast to stay elevated in 2026 at around$2,240 a tonne as refiners and cathode manufacturers continue to respond to solid demand from downstream industries.
“Lithium hydroxide prices are expected to follow a similar path in the next few years, moderating from a 2026 high of about $19,230 a tonne,” it said.
The AOCE said lithium prices have increased dramatically over the past 12 months, with spodumene concentrate increasing almost four-fold and lithium hydroxide almost tripling from mid-2025 lows.
“Spodumene concentrate average price to late May in the June 2026 quarter was around $2,430 a tonne CIF (cost, insurance and freight) China. Lithium hydroxide prices averaged $20,770 a tonne (free-on-board China) for the same period,” it said.
Two notable supply shocks contributed to the rise in prices over the period. This includes China’s Jianxiawo mine’s permit lapsing in mid-2025 causing supply curbs to China’s battery mineral supply chains. It was exacerbated later by Jiangxi province revoking expired mining permits of the lepidolite mines in December 2025, said AOCE.
Chinese commodity data group Sunsirs said the current lithium carbonate futures market is caught in a game between strong fundamentals and weak expectations. “The overall supply-demand pattern of domestic lithium carbonate still remains tight at present,” it said. .
Permit revocation sparked price jumps in lithium prices after a long period of weakness. Similarly, the Zimbabwean government introduced an indefinite ban on exports of all raw materials in late February 2026, including spodumene concentrate. This follows the mid-2025 announcement of permanent ban on exports of spodumene from 1 January 2027. On 22 May 2026, lithium was declared as one of 14 critical minerals in Zimbabwe with their raw form exports banned.
BMI said robust energy storage sector demand will continue to place a floor under lithium prices and may yet be sufficient to insulate the market from a more pronounced correction, shrugging off looming oversupply jitters.
“Lingering uncertainty over the pace of Jianxiawo mine restart may yet temper bearish sentiment. That said, the balance of risks remains skewed to the downside, as we continue to view current price levels as already extending beyond what underlying fundamentals alone would justify,” it said.
Source: Read the original article on www.thehindubusinessline.com