China lithium prices hit five-month low on expectations of oversupply in 2027
China's lithium futures prices sank to a five-month low on Tuesday on expectations of oversupply of the electric vehicle battery metal in 2027, even as near-term demand remained strong, according to analysts.
The most active lithium carbonate contract on the Guangzhou Futures Exchange hit its lowest since February 10 at 136 800 yuan ($20 216.95) a ton, before erasing some losses to trade down 4.45% at 141 280 yuan a ton to end the morning session.
The contract has fallen by around a third from a year-to-date high of 209 800 yuan a ton hit on May 13.
The market has started to trade on expectations of a supply glut in 2027 even as near-term fundamentals remain healthy, analysts at Haitong Futures said in a note.
China will levy a 2% consumption tax on battery products including primary lithium batteries and lithium-ion batteries from September 1, with the rate doubling to 4% on September 1, 2027.
Goldman Sachs said that the anticipation of the consumption tax resumption could pull forward demand ahead of the implementation date.
"It might weigh on (lithium) demand in the long term, but in the short run, a persistent inventory drawdown and robust demand in the off-season will lend some support to prices," analysts at Guotai Junan said.
Separately, a production resumption at CATL flagship Jianxiawo mine is expected to increase lithium supply by up to 25 000 tons in the second half of the year, narrowing a supply gap, according to Haitong analysts.
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