Lithium and Spodumene Climb to Multi-Year Peaks Amid Supply Tightening

Battery-grade materials are experiencing a significant upward correction this week. Lithium carbonate and hydroxide prices have climbed to their highest levels in over two years, with CIF assessments for China, Japan, and South Korea breaking through the US$20,000 per ton barrier. Australian-sourced spodumene has also surpassed US$2,000 a ton—a milestone not reached since October 2023.

The momentum has caught the attention of major market participants. Derivatives trading on the Chicago Mercantile Exchange saw lithium hydroxide futures hit record volumes of 8,296 tons in the first full week of 2026, far exceeding early 2025 benchmarks. This surge in trading activity reflects both speculative interest and genuine supply concerns gripping the sector.

Price targets are being aggressively revised upward. Bell Potter upgraded its spodumene forecast to US$1,750 a ton by year-end—an 89 percent jump from the previous US$925 projection. More bullish market participants are pricing in peaks near US$3,250 a ton before mid-year. The Guangzhou Futures Exchange’s most-active lithium carbonate contract closed at 156,060 yuan per ton (approximately US$22,300), marking its highest point since November 2023 and representing a 160 percent rally from 2025’s lows.

China’s policy shift has been a critical catalyst. Beijing’s reduction of value-added tax rebates on battery exports—dropping from 9 percent to 6 percent in April and eliminating entirely by January 1, 2027—has created urgency among manufacturers. Battery producers are accelerating shipments ahead of the deadline, creating a demand front-load that’s supporting lithium consumption. Meanwhile, Chinese inventories have fallen to their weakest levels since mid-2024, making the market extraordinarily sensitive to any demand fluctuations.

This recovery marks a sharp departure from what many describe as an exceptionally brutal market period. Throughout 2025, overcapacity and disappointing electric vehicle uptake pressured lithium carbonate prices to four-year lows. The second half of 2025 finally brought relief as disciplined supply cuts and inventory normalization took hold. By December, prices had recovered roughly 56 percent from January’s bottom.

Whether this upswing proves durable hinges on two critical factors: the pace at which new production capacity enters the market and whether near-term demand growth actually materializes. Industry watchers remain cautious, recognizing that previous cycles have rewarded pessimism more often than optimism.