Lithium’s Year-End Rally: EV Tax Shift, Spodumene Auctions and Fragile Fundamentals
Battery-grade lithium carbonate in China climbed into late-October on expectations of a year-end EV buying rush before 2026 tax changes and strong LFP demand from energy storage. DDP China assessed at ¥81,700/mt (Oct 29), +6.8% w/w. Buoyant week in spodumene, including an Albemarle auction, before Friday’s pullback on lepidolite restart talk; CJK carbonate mirrored China’s volatility. Despite momentum, Q4 remains surplus on supply growth, implying a rally vulnerable to sentiment shocks.
Policy-driven demand pulse
Tax regime: China ends full EV purchase-tax exemption after 2025; from Jan 1, 2026, a 50% rate applies (max ¥15,000 reduction) only for compliant models. CAAM has urged a gradual phaseout, but markets largely shrugged. Expect buy-ahead in Nov–Dec 2025.
Price performance & drivers
Battery-grade Li₂CO₃ (DDP China): ¥81,700/mt (Oct 29), +6.8% w/w, +11.1% m/m; traders see upside into January on LFP/ESS orders, though spot liquidity is thin.
China recycling: higher Li pricing underpinned LFP hydromet run-rates and October procurement, feeding back into black mass and coefficients.
Upstream signals: spodumene & futures
Spodumene SC6 cif China: $950–990/t (Oct 31) after a sharp Friday pullback; Albemarle auction (Oct 30) at ¥7,058/t (FCA China, SC5.21) normalizes to $1,002–1,007/t CIF SC6; GFEX Jan-26 slid to ¥80,780/t Friday on lepidolite restart speculation.
International reference checks
CJK Li₂CO₃ (cif): $9.35–10.00/kg (Oct 31); LiOH $9.00–10.60/kg, with spot thin and LTAs dominant.
Structural backdrop: still surplus in Q4
Supply growth from Argentina, Australia, Mali and China’s refining capacity keeps Q4 in surplus, with market consensus near $8,800/t LCE (CIF Asia) despite Q3’s demand resilience.
Outlook
Sentiment: Bullish, tactically — policy-driven buy-ahead and ESS demand likely support carbonate through year-end.
Risk: Pullback risk elevated — thin spot, GFEX volatility, and surplus supply argue for choppy upside and vulnerability to bearish headlines (e.g., lepidolite restarts).