Lithium carbonate: Supply-side expectations fluctuate repeatedly, and market sentiment loosens, leading to a sharp decline in prices.

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GF Futures Research License [2011] No. 1292

Lin Jiani Z0020770 March 31, 2026, Tuesday

Market Overview: Today, lithium carbonate futures declined sharply overall. After the price center rapidly rose in the past two days, today’s sentiment experienced a significant adjustment. Repeated policy news from Zimbabwe loosened the bullish logic, and capital performance in the equity sector was also weak. The main contract broke below the 160k support level. As of the close, the main contract LC2605 fell 7.79% to 157,200, with total open interest across all weighted contracts at 637.1k lots, a significant intraday reduction of 19.7k lots.

Supply-side news repeatedly fluctuates; high-level driving logic weakens

Recently, with the resurgence of supply-side news, the market logic shifted to trading on the short-term supply tightening and imbalance gap. Since the second half of last week, the price center on the market quickly rose, mainly due to slow progress in negotiations over Zimbabwe’s mining ban policy and expectations that a diesel shortage in Australia might affect future mine operations. Today, market sentiment reversed sharply, mainly because new feedback emerged from the news. Starting last night, some new information about Zimbabwe policy negotiations circulated, breaking previous expectations that Africa’s policies would remain tough in the short term and could not be eased. As a result, bullish market logic adjusted quite rapidly.

It is understood that currently, major Chinese-funded enterprises in Zimbabwe are still negotiating with the government. Progress has been made, but no definitive results have been announced yet. It is expected that details may be finalized in April, mainly concerning lithium salt processing localization and tariffs. The impact cycle of African resource supply issues still needs to be dynamically monitored. In Australia, concerns about local mine production due to oil shortages caused by the war have arisen. Major mines with some inventory reserves have not yet been affected in actual operations. Geopolitical disturbances are complex, and future developments and actual impacts depend on the persistence of the oil shortage.

Additionally, lithium battery stocks experienced a noticeable correction today. After a rapid rise in recent days, some funds at high levels cashed out and withdrew quickly, and the resonance of the equity sector also intensified the market’s pessimistic sentiment.

Fundamentals’ resilience continues to weaken marginally, focus on real transmission

Recently, the fundamentals of lithium carbonate remain resilient, with both supply and demand increasing in reality, and marginal drivers weakening. In the first quarter, smelting capacity gradually increased, weekly production data after the Spring Festival maintained growth, upstream salt factories’ maintenance ended, and operating rates gradually improved. After some new projects increased output earlier, production continued to climb, with stable increases expected in April. The core supply focus in the second quarter still centers on raw material conflicts and new project commissioning progress.

Demand remains generally optimistic. Due to seasonal effects and subsidy reductions at the beginning of the year, sales of power vehicles were somewhat weak, but the significant increase in terminal charging capacity provided support. The outlook for energy storage remains optimistic, with leading companies maintaining full production. Under rigid orders, material start-up is expected to remain steady. Structurally, lithium iron phosphate continues to grow month-on-month, while ternary cathodes are relatively weaker due to market share squeeze and policy rollback impacts. In the second quarter, attention will be on changes in terminal demand structure and export expectations. Inventory reduction continued in the first quarter, with a buildup last week, and marginal drivers weakened. Upstream smelter inventories and downstream inventories increased last week, salt factory inventory buildup expanded, while battery cell factories and traders’ inventories continued to slightly decline.

Market Outlook

In the short term, repeated supply-side expectations and macro geopolitical changes will continue to introduce trading variables, likely increasing event-driven trading. In the medium term, potential contradictions on the supply side may further intensify in the second quarter. Demand expectations remain optimistic, energy storage is more certain, and focus on exports and energy substitution logic. Under the medium-term logic, lithium carbonate’s bottom support has strengthened. Short-term news disruptions and high-level profit-taking may lead to some correction, with the market expected to fluctuate within a wide range, with main contracts referencing 153,000-160k.

Risk Warning: Changes in macro environment, domestic and international supply disruptions, downstream demand below expectations.