Lithium Prices Rebound 86% Year-to-Date, but Most Institutions Warn of a Pullback in H2
Miles Bennett
CME lithium carbonate futures have surged 86% this year back above $20,000 a tonne, but the rally hinges on a single Chinese mine shutdown — and most institutions warn prices have decoupled from fundamentals.
An 86% rally — what happened?
CME lithium carbonate futures are up 86% year-to-date, back above $20,000 per tonne for the first time since late 2023.
The trigger: CATL's (宁德时代) Jianxiawo mine in Yichun, Jiangxi province halted operations last August after its mining permit expired. This means → one of the world's largest single lithium assets — roughly 150,000 tonnes of lithium carbonate equivalent per year — suddenly dropped out of supply.
According to BMI (Benchmark Mineral Intelligence, a leading lithium consultancy), the shutdown accelerated inventory drawdowns across China's processing chain, pushing prices sharply higher.
How wild did the futures market get?
News of the shutdown triggered a wave of speculative buying on the Guangzhou Futures Exchange. It peaked last November: 27 million lithium carbonate futures contracts and 12.5 million options contracts traded in a single month.
In plain terms = the global lithium market produces less than 2 million tonnes a year, yet the exchange's "paper lithium" turnover in one month dwarfed the physical market many times over.
The exchange had to raise fees and margin requirements multiple times and impose position limits before the frenzy cooled.
When does that mine restart?
CATL initially expected the permit renewal within three months. It is still waiting. BMI calls Jianxiawo's restart date "the single largest swing factor in the price outlook over the next 24 months."
Yichun is a key lithium-mining region in China, and local regulators have recently tightened scrutiny of the mining sector — creating uncertainty for other nearby operators too. In February, Zimbabwe unexpectedly announced a raw-materials export ban (later revised to quotas), further amplifying the market's sensitivity to supply disruptions.
Still, the consensus view is that Jianxiawo will eventually reopen — China's domestic lithium resources are limited, and the mine is too important to national supply security to stay closed permanently.
What are institutions saying about the outlook?
BMI considers lithium overvalued and forecasts a "material pullback" in the second half — the logic: higher prices will incentivise shuttered projects to restart, bringing supply back online.
BNP Paribas is blunter: prices have "decoupled from fundamentals," driven by excessive futures-market optimism and irrational order flows across the supply chain. It expects supply to remain in surplus this year and next.
Even the relatively bullish Citi, which targets $32,000/tonne for CME lithium hydroxide, attaches a three-month horizon and expects prices to come under pressure next year as supply rebounds.
Can demand hold up its end?
Global EV sales in Q1 came in below expectations, undermining the market's full-year demand optimism.
Stationary energy-storage battery demand is growing fast, but only partially offsets the slowdown in EV growth. This means → demand alone is not strong enough to sustain the current price level.
One permit, one global market?
The intensity and durability of this lithium rally will largely come down to when the Yichun Natural Resources Bureau issues CATL a new mining permit.
In plain terms = a single municipal-level administrative decision is steering the price of a global commodity — which itself reveals how fragile the foundations of the current rally are.
Content is for reference only, not financial advice.