The lithium market is currently grappling with a paradox: falling prices amidst reported inventory drawdowns. Benchmark Minerals' Monthly Lithium Inventory China reported a 2.8% month-over-month decrease in carbonate and hydroxide inventory in August, continuing a year-to-date trend where levels have dropped by 10.0%. This absence of the typical first-half inventory build and second-half drawdown leaves the market with less of a buffer against price movements as the year-end approaches, a period usually marked by strong consumption.
Mysteel's analysis corroborates the destocking trend, noting that China's lithium carbonate market has seen destocking coincide with falling prices since July. Concentrated maintenance cuts and reduced shipments from Chile, particularly a 48.4% plunge in lithium sulfate exports to China in July, have contributed to these inventory drawdowns. Despite this, futures prices have declined, with the market seemingly more sensitive to negative news, such as concerns over consumption taxes and expectations of increased supply in 2027, rather than supportive factors like production cuts or robust energy storage demand.
Looking ahead, Mysteel anticipates a significant inventory drawdown of approximately 22,000 tonnes in August due to increased supply from African ore arrivals and salt lake output recovery, alongside a 5.2% month-over-month rise in LFP production schedules. Although spot availability remains tight, the market's focus has shifted from current inventory levels to future supply and demand dynamics, including the restart of Jianxiawo and incremental supply from Zimbabwe and Australia. Analysts predict lithium prices may trend higher in mid-to-late September, potentially reaching $170,000 to $180,000 per tonne, driven by downstream stocking and continued inventory drawdowns, but with a moderate upward slope due to buyer caution. However, an acceleration of spodumene concentrate and South American salt lake imports from late November could increase lithium salt output and put downward pressure on prices.
