Lithium price: BMI raises forecast, warns rally has outrun fundamentals
Futures are back above 150,000 yuan on CATL's stalled restart, but BMI sees Chinese spot prices sliding through 2028, with sodium-ion batteries creeping onto the demand curve.
The most active lithium carbonate contract on the Guangzhou Futures Exchange closed at 152,500 yuan (about $22,500) a tonne on Wednesday, up 11% from July’s lows, as the stalled restart of CATL’s giant Jianxiawo mine keeps a floor under a market that spent midsummer bracing for oversupply.
The contract is up 29% in 2026 and 87% over the past year, although it remains roughly a quarter below the two-year high above 200,000 yuan set in mid-May, before expectations of restarted supply in China and Australia knocked it back.
The rebound leaves lithium running ahead of even freshly upgraded forecasts. BMI, a unit of Fitch Solutions, has lifted its 2026 average price forecast for Chinese lithium carbonate to $20,100 a tonne, nearly double last year’s average of $10,502, and its lithium hydroxide forecast to $19,600, citing “persistent supply disruptions and resilient demand, especially from the energy storage sector.”
The upgrade is not a bull call however, with Chinese spot carbonate averaging $22,941 a tonne so far this year, meaning BMI’s full-year number implies a pronounced slide over the remaining months. The firm pencils in quarterly averages of $17,200 and $16,800 for the third and fourth quarters, and says it continues “to view current price levels as already extending beyond what underlying fundamentals alone would justify.”
BMI expects the correction to run well beyond December. Its carbonate forecast drops to an average of $16,500 a tonne in 2027 and bottoms at $14,500 in 2028, before recovering to $17,500 in 2029 and $18,500 in 2030. The market stays in surplus through the end of the decade on the firm’s numbers, only tipping into deficit over 2031 to 2035, as underinvestment and project delays during the 2024-2025 price slump finally catch up with supply growth.
BMI forecasts global lithium production to grow 13.2% this year, led by Australia and China, with the recovery in prices coaxing back previously mothballed higher-cost operations, and expects the surplus to materialize in earnest closer to 2027. Mineral Resources is restarting Bald Hill, Core Lithium is bringing Finniss back, and Jianxiawo would return around 3% of global supply on its own.
Whether Jianxiawo actually returns is the market’s biggest swing factor. The local ecology bureau confirmed no ore loading or crushing was under way at the mine in early August, with its environmental impact assessment still awaiting approval.
Price reporting agency Benchmark Mineral Intelligence has warned that a prolonged delay, which puts what it estimates at 4% of global supply at risk, could wipe out this year’s surplus entirely.
Winter in South America has added its own disruptions: a severe late-July snowstorm hit Argentina’s Catamarca province, disrupting operations at Rio Tinto’s 32,000-tonne Fenix operation on the Salar del Hombre Muerto.
Energy storage is the reason BMI does not expect a deeper rout. China’s output of power and energy storage batteries hit 191.7 GWh in May, up 55% from a year earlier, and the firm’s power and renewables team forecasts global battery storage capacity to nearly quadruple from about 325 GW this year to 1,270 GW by 2035, with China and the US accounting for more than three quarters of current installations.
The rise of lithium iron phosphate chemistry, which the International Energy Agency says powers more than half of electric vehicles and over 90% of battery storage worldwide, also keeps carbonate trading at a premium to hydroxide, with LFP taking a record 83.3% of Chinese battery installations in June.
Demand growth is nonetheless slowing sharply. BMI sees global lithium demand rising 5.8% this year, down from 18.5% in 2025, as global EV sales growth cools to 3.9% and China’s electric vehicle market undergoes what the firm calls a structural deceleration, even with new energy vehicles at a record 58.5% of new car sales and monthly exports topping 500,000 units for the first time in June.
Elevated fuel prices from the Middle East conflict, BMI notes, are a wild card that could tilt consumers back toward electrified powertrains faster than expected.
The longer-term threat comes from chemistry. CATL’s Naxtra sodium-ion battery already matches LFP cells on energy density, Changan plans a sodium-powered passenger car, and CATL expects up to 20,000 EVs to carry its sodium batteries this year. That, along with faster-than-anticipated advances in battery recycling, is the downside risk to a forecast that already sees lithium prices spending the rest of the decade below where they trade today.
The unit operates mostly in Odisha and accounted for 21% of India’s overall coal production in fiscal year 2026.
